Alphabet sees share price rocket after strong earnings beat
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Alphabet sees share price rocket after strong earnings beat

Shares of Silicon Valley giant Alphabet, the parent of search engine market leader Google and a number of other tech companies, skyrocketed at the end of last week. The reason? A strong beat of Wall Street’s expectations in its second quarter earnings report. The good news comes after a spate of negative headlines for Alphabet that include staff protests, an impending anti-trust enquiry, and sub-par revenue growth in its first quarter.

After a huge jump at the end of last week, Alphabet’s share price has appreciated by 21% year to date

Alphabet July 29

Source: Yahoo Finance

Here’s the financial data: Alphabet reported revenues of $38.94 billion for the quarter, beating out consensus estimates for revenues of $38.15 billion. That was a relief for investors, who were less-than thrilled by Alphabet’s lukewarm revenues in the quarter previous. The company outperformed to a greater degree on earnings, delivering $14.21 per share. Analysts had expected to see earnings of $11.30 per share. Alphabet also spent less acquiring traffic (a vital component in its lucrative online advertising business) - $7.24 billion against predictions of $7.27 billion.

The company also announced that the board of directors would be approving a repurchase of up-to an additional $25 billion of stock, and chief financial officer Ruth Porat said this would be used to support growth through acquisitions and investment.

Google’s advertising business – still the biggest revenue generator by far for its parent – continues to look unstoppable. This quarter, it brought in $32.6 billion – a significant jump from the comparable quarter’s $28.09 billion. According to Porat, YouTube “was again the second largest contributor of revenue growth, and [we’re] really pleased with the ongoing momentum that we’re seeing here.”

With an anti-trust probe around the corner courtesy of the Department of Justice, and a $1.7 billion fine from the European Commission just behind it, Alphabet is increasingly coming under regulatory scrutiny. CEO Sundar Pichai said “to the extent we have to answer questions, we will do so constructively.” There is little doubt that, whatever comes next, Alphabet couldn’t look stronger going into it.

Disclosure

Dominion holds Alphabet in its Global Trends Managed Fund.


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