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Alphabet Soars on Q2 Results: ETFs to Benefit

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After the closing bell on Jul 25, Google-parent Alphabet (GOOGL - Free Report) reported upbeat second-quarter 2019 results, with earnings and revenues topping estimates. The latest jump in revenues was welcome as the company’s top line missed heavily in the first quarter. The stock jumped about 8% after hours.  The company also announced a $25 billion stock buyback program.

Inside the Results

Earnings per share were $14.21, trumping the Zacks Consensus Estimate of $11.49 and improving from the year-ago $11.75. Net revenues, excluding total traffic acquisition cost or TAC (TAC is the portion of revenues shared with Google’s partners, and an amount paid to distribution partners and others who direct traffic to the Google website) came in at $31.77 billion, up about 21% year over year. Net revenues beat the Zacks Consensus Estimate of $30.90 billion.

Alphabet generated the majority of revenues from growing Google’s advertising sales (nearly 84%) though its booming cloud business. The company reported advertising revenues of $32.6 billion, marking a 16% year-over-year increase, while its Other Revenues category, which comprises cloud computing and its hardware efforts, tallied $6.18 billion, marking about 40% year-over-year growth, per an article published on Forbes.

Management has noted that the cloud unit has touched an annual run rate of more than $8 billion. This figure beat projections from Morgan Stanley, which called for $6 billion per year. Google intends to triple the cloud team’s sales force over the next few years.

ETFs in Focus                       

The upbeat results are likely to have a huge impact on ETFs that are heavily invested in this Internet giant. Below we highlighted five ETFs with double-digit exposure to Alphabet that could see some gains in today’s trading session (see: all the Technology ETFs here).

Vanguard Communication Services ETF VOX

This fund also targets the communication sector by tracking the MSCI US Investable Market Communication Services 25/50 Index. The Zacks Rank #2 (Buy) fund puts about 20.8% weight in the stock. 

Fidelity MSCI Communication Services Index ETF FCOM

This Zacks Rank #2 fund follows the MSCI USA IMI Communication Services 25/50 Index. Here also, Alphabet holds more than 20% weight (read: Facebook Q2 Beat Put These ETFs in Focus).

Communication Services Select Sector SPDR Fund XLC

This ETF tracks the communication services sector of the S&P 500 Index Alphabet, which takes more than 22% in the fund. This fund also has a Zacks Rank #2 (see all communication services ETFs here).

iShares Global Comm Services ETF IXP 

This ETF provides global exposure to companies in media, entertainment, social media, search engine, video/gaming and telecommunication services by tracking the S&P Global 1200 Communication Services Sector Index. The fund invests more than 18% in the in-focus stock. This fund has a Zacks Rank #3 (Hold).

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