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Alphabet's (GOOGL - Free Report) second-quarter 2021 earnings of $27.26 per share surpassed the Zacks Consensus Estimate by 37.1%. The figure surged 169.1% year over year and 3.7% sequentially.
Revenues of $61.9 billion increased 62% year over year (57% at constant currency). The figure was up 11.9% front the prior quarter.
Net revenues — excluding total traffic acquisition costs or TAC (TAC is the portion of revenues shared with Google’s partners, and amounts paid to distribution partners and others, who direct traffic to the Google website) — were $50.95 billion, which outpaced the consensus mark by 10.6%. The figure rose 61.3% and 11.7% from the year-ago quarter and the previous quarter, respectively.
TAC of $10.9 billion was up 63.3% year over year and 12.5% sequentially.
Top-line growth was driven by solid momentum across the company’s search, advertising, cloud and YouTube businesses. Increased online activities throughout the world remained a tailwind.
The company’s growing investments in AI and cloud technology, which are expected to yield huge returns in the days ahead, remain major positives. This, in turn, is expected to continue instilling investors’ optimism in the stock.
Coming to the price performance, Alphabet has returned 80.9% on a year-to-date basis compared with the industry’s rally of 64.6%.
Top-Line Details
Alphabet reports under three segments: Google Services, Google Cloud and Other Bets.
Google Services
Revenues from the Google services business increased 63.1% year over year to $57.1 billion, accounting for 92.3% of quarterly revenues.
Year-over-year growth benefited from the growing proliferation of consumer online activities and rising advertiser spending.
Under the services business, search revenues from Google-owned sites increased 68.1% year over year to $35.8 billion.
YouTube advertising revenues grew 83.7% year over year to $7 billion, while Network advertising revenues increased 60.4% to $7.6 billion.
Total Google advertising revenues grew 68.9% year over year to $50.4 billion and accounted for 81.5% of total revenues. This was primarily attributed to the strength in the retail category.
Google Other revenues — which consist of Google Play and YouTube non-advertising revenues — were $6.6 billion for the second quarter, up 29.3% year over year.
Google Cloud
Google Cloud revenues rose 53.9% year over year to $4.6 billion, accounting for 7.5% of the quarterly revenues.
Other Bets Segment
Other Bets’ revenues were $192 million, up 29.7% year over year, accounting for 0.3% of total second-quarter revenues.
Operating Details
Cost and operating expenses were $42.5 billion, up 33.3% year over year.
Operating margin was 31.3%, which expanded from 16.7% in the year-ago quarter. Segment-wise, Google Services’ operating margin of 39.2% expanded from 27.3% in the prior-year quarter.
Google Cloud and Other Bets reported losses of $591 million and $1.4 billion, respectively.
Balance Sheet
As of Jun 30, 2021, cash and cash equivalents, and marketable securities were $135.9 billion, up from $135.1 billion as of Mar 31, 2021.
The company generated $21.9 billion in cash from operations in the second quarter compared with $19.3 billion in the first quarter.
It spent $5.5 billion on capex, netting a free cash flow of $16.4 billion in the reported quarter.
Zacks Rank and Stocks to Consider
Currently, Alphabet carries a Zacks Rank #3 (Hold).
Image: Bigstock
Alphabet (GOOGL) Q2 Earnings Beat Estimates, Revenues Rise Y/Y
Alphabet's (GOOGL - Free Report) second-quarter 2021 earnings of $27.26 per share surpassed the Zacks Consensus Estimate by 37.1%. The figure surged 169.1% year over year and 3.7% sequentially.
Revenues of $61.9 billion increased 62% year over year (57% at constant currency). The figure was up 11.9% front the prior quarter.
Net revenues — excluding total traffic acquisition costs or TAC (TAC is the portion of revenues shared with Google’s partners, and amounts paid to distribution partners and others, who direct traffic to the Google website) — were $50.95 billion, which outpaced the consensus mark by 10.6%. The figure rose 61.3% and 11.7% from the year-ago quarter and the previous quarter, respectively.
TAC of $10.9 billion was up 63.3% year over year and 12.5% sequentially.
Top-line growth was driven by solid momentum across the company’s search, advertising, cloud and YouTube businesses. Increased online activities throughout the world remained a tailwind.
Alphabet Inc. Price, Consensus and EPS Surprise
Alphabet Inc. price-consensus-eps-surprise-chart | Alphabet Inc. Quote
The company’s growing investments in AI and cloud technology, which are expected to yield huge returns in the days ahead, remain major positives. This, in turn, is expected to continue instilling investors’ optimism in the stock.
Coming to the price performance, Alphabet has returned 80.9% on a year-to-date basis compared with the industry’s rally of 64.6%.
Top-Line Details
Alphabet reports under three segments: Google Services, Google Cloud and Other Bets.
Google Services
Revenues from the Google services business increased 63.1% year over year to $57.1 billion, accounting for 92.3% of quarterly revenues.
Year-over-year growth benefited from the growing proliferation of consumer online activities and rising advertiser spending.
Under the services business, search revenues from Google-owned sites increased 68.1% year over year to $35.8 billion.
YouTube advertising revenues grew 83.7% year over year to $7 billion, while Network advertising revenues increased 60.4% to $7.6 billion.
Total Google advertising revenues grew 68.9% year over year to $50.4 billion and accounted for 81.5% of total revenues. This was primarily attributed to the strength in the retail category.
Google Other revenues — which consist of Google Play and YouTube non-advertising revenues — were $6.6 billion for the second quarter, up 29.3% year over year.
Google Cloud
Google Cloud revenues rose 53.9% year over year to $4.6 billion, accounting for 7.5% of the quarterly revenues.
Other Bets Segment
Other Bets’ revenues were $192 million, up 29.7% year over year, accounting for 0.3% of total second-quarter revenues.
Operating Details
Cost and operating expenses were $42.5 billion, up 33.3% year over year.
Operating margin was 31.3%, which expanded from 16.7% in the year-ago quarter. Segment-wise, Google Services’ operating margin of 39.2% expanded from 27.3% in the prior-year quarter.
Google Cloud and Other Bets reported losses of $591 million and $1.4 billion, respectively.
Balance Sheet
As of Jun 30, 2021, cash and cash equivalents, and marketable securities were $135.9 billion, up from $135.1 billion as of Mar 31, 2021.
The company generated $21.9 billion in cash from operations in the second quarter compared with $19.3 billion in the first quarter.
It spent $5.5 billion on capex, netting a free cash flow of $16.4 billion in the reported quarter.
Zacks Rank and Stocks to Consider
Currently, Alphabet carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are KLA (KLAC - Free Report) , Carrier Global (CARR - Free Report) and Trimble (TRMB - Free Report) . All three companies currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Both KLA and Carrier Global are scheduled to report quarterly earnings on Jul 29, whereas Trimble is slated to report on Aug 4.