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Google owner Alphabet sees advertising revenue soar during pandemic

Alphabet’s operating profits more than tripled to $19.4bn

Google owner Alphabet (NASDAQ:GOOGL) announced record-breaking Q2 revenues on Tuesday evening as the firm continued to benefit from the pandemic.

Alphabet far exceeded its expectations, recording second quarter revenues of $61.9bn, up 62% compared to the same period a year ago.

The jump reflects a rise in online activity by consumers, in particular an 83.7% increase in ad revenue generated from YouTube.

Alphabet’s operating profits more than tripled to $19.4bn, as its operating costs rose 33.2%, while its headcount increased by 13%.

That was entirely driven by strong results in the core Google Services business, which includes; Android, Chrome, Maps, Play, Search and YouTube. Sales in that business rose 63.1% to $57.1bn, while operating profits rose 134.2% to $22.3bn. Traffic Acquisition Costs in the division rose 63.3% to $10.9bn.

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Thomas Philippon, an economist and professor of finance at New York University, told The Guardian that people have been pushed to use the services of tech companies during the pandemic.

“They were already on the rise and had been for the best part of a decade, and the pandemic was unique,” Philippon said. “For them it was a perfect positive storm.”

The Alphabet share price rose by 3.2% in after-market trading.

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown: 

“With confidence returning to economies inching out of lockdowns, marketing departments are loosening the purse strings. As the sales of goods and services move online, Google is gathering an ever-increasing share of global advertising spend. That means Google is enjoying a growing share of a pie that is itself expanding quickly. A rising tide lifts all boats, but Google is a veritable hovercraft compared to the familiar names of the ‘old media’.”

“As a software platform provider, Alphabet enjoys incredible operating leverage, which is to say its revenues feed through to profits at a pace other companies could only dream of. That’s true at the cash level too, and as a result the group’s maintained a net cash pile of well over $100bn despite buying back $24.2bn of shares in the quarter.”

“Spectacular growth, incredible cash generation and multiple category killing products all at a fairly reasonable 30 times future earnings. It’s difficult to find things not to like at Alphabet.”A

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