- The company put cost-cutting measures in place during the quarter.
- Revenue growth slowed, but investors expected much worse.
Alphabet shares rose as much as 4% in extended trading on Tuesday after the company reported earnings for the first quarter.
Here’s how the company did:
- Earnings: $9.87 per share, adjusted
- Revenue: $41.16 billion
- Cloud revenue: $2.78 billion
- YouTube advertising revenue: $4.04 billion
- Traffic acquisition costs: $7.45 billion
Alphabet’s revenue growth rate slowed to 13% in the quarter from 17% one quarter earlier, according to a statement. Though it’s difficult to say what caused the stock’s rise, investors were likely expecting much worse. Given the advertising spend pull-back from some of its major customers and its prior slowed ad growth, the results could have shown a steeper hit. Advertising still makes up the vast majority of Alphabet’s total revenue, at 82%.
Analysts surveyed by Refinitiv had expected $10.33 in adjusted earnings per share on $40.29 billion in revenue. Analysts polled by FactSet had expected $7.51 billion in traffic acquisition costs in the quarter. However, comparing Alphabet’s actual results with estimates isn’t straightforward given the difficulty of predicting the impact of the coronavirus.
On the conference call with analysts and investors, CEO Sundar Pichai said that usage of search, YouTube, and other apps and services was significantly higher as people looked for information on the coronavirus pandemic. Pichai gave an example of increasing engagement, saying coronavirus-related search activity in the US, at its peak, was four times greater than during the peak of the Super Bowl.
But ad revenues suffered even as engagement rose. “In March, we experienced a significant and sudden slowdown in ad revenue” due to the coronavirus pandemic, Pichai said. He said that the company delayed some ad launches as a result. YouTube ad revenue grew 33% from last year, CFO Ruth Porat said in the earnings call. However, she noted that brand advertising saw a steep drop-off in March, while other forms of YouTube advertising did not.
Google’s total advertising revenues rose to $33.76 billion from $30.59 billion the prior year: