The third quarter of Alphabet showed growth in search advertising revenue and strong growth in YouTube

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The third quarter of Alphabet showed growth in search advertising revenue and strong growth in YouTube

04.11.2020 News

Shares of Alphabet, which rose 18.2% over the past 6 months, rose 9% after closing trading on Thursday when the global advertising giant announced significant improvements in the reporting quarter.

Google’s parent financial report far exceeded analysts’ expectations and showed a resumption of advertising revenue growth after reporting a drop in revenue for the first time in its history. The situation was related to the crisis of the COVID-19 pandemic, when many advertisers reduced their costs, especially in the tourism sector.

The third quarter saw a recovery in the online advertising market, which was also proved by Snap and Pinterest, announcing an increase in advertising revenue over the past 3 months to September 30.

Market analysts noted that the success of the 3rd quarter of Google was partly due to the growth of political advertising in the run-up to the November 3 US presidential election.

Alphabet reported earnings per share increase of 62% (compared to last year’s value) to $ 16.40, which is significantly higher than the average analytical forecast of $ 11.29.

Total quarterly revenue rose to $ 11.2 billion due to reductions in some capital and personnel costs. At the same time, the company warned that it does not plan to reduce its investment in cloud business development, highlighting it as a priority.

Total revenue rose 14% to $ 46.17 billion, also above analysts’ expected $ 42.90 billion.

80% of Alphabet’s total revenue has traditionally come from advertising, amounting to $ 37.10 billion. That is higher than $ 33.80 billion a year earlier. Search engine revenue grew 6%, with YouTube’s strongest growth of 32% to about $ 5.04 billion, up from an estimated $ 4.39 billion.

The number of paid subscriptions to music and paid premium YouTube services has grown to more than 30 million, YouTube TV has added more than 3 million subscribers.

The cost of traffic (TAC) was $ 8.17 billion, which is better than analysts expect of $ 7.66 billion.

Google Cloud’s cloud sales generated $ 3.44 billion, better than Wall Street’s $ 3.32 billion. Alphabet said that from the next financial quarter will begin publishing the profits of its cloud division, which will allow investors and analysts to “assess progress.”

Revenue for the third quarter from sales of equipment was $ 5.48 billion compared to $ 4.05 billion a year earlier.

The revenue of the unprofitable division “Other Articles”, which includes the autonomous driving company Waymo, as well as the research company Life Sciences Verily, increased by $ 178 million compared to $ 155 million a year ago, with losses of $ 1.10 billion compared to $ 941 million a year earlier.

Asked about the Justice Department’s lawsuit alleging a monopoly on the search advertising market, the company’s management said it considered the allegations “deeply flawed” and confident of “significant benefits to its search engines for consumers.”

Alphabet CEO Sundar Pichai said that considering complaints in court would create “certainty, clarity and opportunity.”

Alphabet CFO Ruth Porat has warned investors that increased quarantine measures during the COVID-19 pandemic could affect advertising demand. The company did not give a forecast for the next quarter.

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