Google blew past Wall Street’s revenue and profit targets in the second quarter, sending its stock up more than 9% in extended trading on Thursday.
A resurgence in the Google’s core advertising business, after a weak performance in the first quarter of the year, along with strong results in the cloud business pushed Google’s net revenue up about 21% to $31.7 billion. That was nearly $1 billion more than analysts were expecting.
Google’s parent company Alphabet also said that its board authorized the company to repurchase $25 billion of its stock, providing an additional piece of good news to investors.
Alphabet’s stock, which has underperformed the market this year, was up about 9% at $1,230.95 in after hours trading on Thursday.
The earnings report came on the same day as Amazon and Intel reported mixed results, and a day after Facebook delivered a Q2 report that topped analyst expectations.
- Read more Q2 Tech Earnigs:
- Amazon’s Q2 misses on the bottom line, and it warned its profit will disappoint again in Q3
- Intel stock soars 5% after announcing the $1 billion sale of its smartphone modem business to Apple and reporting numbers that crushed Wall Street estimates
- Facebook beat Wall Street’s expectations for its second quarter, but the FTC has opened an antitrust investigation
While Google, along with Facebook, Amazon and Apple, are facing an intense escalation in government scrutiny and enforcement of the tech market, there were few signs of worries during Alphabet’s earnings conference call on Thursday.
“We understand that there will be scrutiny, we will engage constructively. It’s not new to us,” Google CEO Sundar Pichai said on the call, in response to a question about the regulatory pressure. “For me, it’s important that we stay focused on building helpful products for users.”
As he played down the regulatory threat, Pichai cheered investors listening to the call by providing new information about Google’s cloud business. The cloud business, which lets coporate customers host their software in Google’s datacenters, has reached an “annual revenue run rate” of over $8 billion” Pichai said.
It was the first time in two years that Google has provided a snaphsot, however vague, about the cloud business. Recent estimates by Morgan Stanley projected Google’s cloud revenues to reach $6 billion in 2019.
Google’s “other revenues,” which includes the company’s cloud business, as well as hardware sales and mobile app store sales, jumped 40% year-over-year to $6.18 billion.
Here are some of the key numbers that Alphabet reported for Q2:
Net Revenue (excluding traffic acquisition costs): $31.7 billion, up 20.8% year over year, and higher than the $30.84 billion that analysts expected.
Q1 EPS (GAAP): $14.21, compared with $11.19 expected by analysts.
“Other Bets” revenue: $162 million, compared with $145 million last year.
Other bet operating loss: ($989) million versus ($732) million last year.
Google’s capital expenditure: $6.1 billion, compared with $5.4 billion during the same period last year.
Number of employees: 107,646 employees, compared to 89,058 employees last year.
Alphabet’s “Other Bets” — the collection of companies focused on self-driving cars, health technology and internet access — continued to lose money in Q2, with a nearly $1 billion operating loss on revenue of $162 million.
Ad revenue growth bounced back — but it’s not entirely clear why
While Google did not provide any specific details about its YouTube business, CFO Ruth Porat described it as the comapany’s second largest contributor of revenue growth during Q2, after search.
Google’s overall ad revenue growth of more than 19% year-over-year, was well above the 15% growth Google delivered in Q1. Unspecified product changes had Q1 performance and boosted Q2 results, Porat said without providing much color.
“We introduce products changes only after extensive testing, which means there can be some variability in quarterly growth rates,” she said.
Surprisingly, no confirmation was given whether or not the company was under formal investigation by the Department of Justice (DOJ) over antitrust matters. At the end of May, The Wall Street Journal reported that the DOJ was preparing a potential case and had already been in touch with third-party critics of Google.
Yesterday, in its earnings report, Facebook formally announced that is was under investigation by the US Federal Trace Commission over antitrust concerns.
