Google CES 2020

Google earnings for the first quarter of 2020 took a licking, thanks to the coronavirus, but it still keeps ticking.

Parent company Alphabet reported a mixed bag of earnings results on Tuesday, largely due to the coronavirus pandemic and a steep constriction of advertising sales.

In a statement from the company, chief financial officer Ruth Porat characterized the performance as “strong,” at least for the first two months of the year. “But then in March we experienced a significant slowdown in ad revenues,” she explained.

Expecting a downturn due to COVID-19, analysts lowered their earnings estimates ahead of the tech giant’s report. Alphabet still reported an earnings miss, but it wound up edging out revenue expectations.

The numbers reflect the challenges in the ad business right now, as well as the dramatic changes to many consumers’ way of life.

Google’s digital ad growth for the quarter ending in March dropped due to declines in ad revenue from the  travel, auto and retail sectors. And while more users turned to YouTube during stay-at-home orders, demand for advertising on the video platform still stumbled, pulling in $4.04 billion versus the $4.14 billion expected.

Overall advertising and services revenue from properties such as search, Gmail, Google Play and YouTube grew — as much as 11.6 percent to $28.54 billion — but still came in below the just-lowered expectations of $29.07 billion.

Google’s $9.87 earnings per share also fell short of the $10.73 expected. During the same period last year, the company earned $11.90 a share.

On the up side, the company’s gross revenue landed at $41.16 billion for an increase of 13 percent. While that fell short of its 17 percent growth from the year-ago quarter, it was enough to beat expectations of $40.98 billion.

And although traffic acquisition costs climbed 9 percent, it wasn’t as much as expected. Net revenue, apart from TAC, clocked in at $33.7 billion, topping analyst predictions of $33.2 billion.

For giants like Google, Microsoft and Amazon, the cloud business has increasingly become a crucial engine driving their technology empires. That may be even truer now, as companies of all kinds rely on remote work tools during the pandemic.

That’s certainly the case for Google, whose cloud computing revenue soared to $2.78 billion. While less than the $2.81 billion anticipated, it still amounts to a surge in growth of 34 percent.

And that boost in YouTube viewership may not have equated to ad sales, specifically, but the video platform still pulled in overall revenue growth of 33 percent, putting it at $4.038 billion.

In after-hours trading, Alphabet’s stock — which fell 3 percent during regular trading on Tuesday — initially jumped by roughly 4 percent.

The takeaway from these numbers is that even a tech giant as massive as Google isn’t immune to the dramatic business shifts caused by the health crisis. But neither did it buckle, or at least as much as experts figured. What helped stem the bleed is clearly the diversity in its offerings.

For instance, the “Other Revenue” category — which covers Pixel smartphones, the Google Play store and Nest smart home gadgets — pulled in $4.44 billion, compared to $3.6 billion in the same period last year.

While that’s heartening to some investors, the worst may not be over quite yet. Although Google doesn’t offer guidance, analysts believe that the major impacts from the pandemic won’t be felt fully until the summer.

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