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Google’s Parent Company Alphabet Reports Better-than-expected Third-quarter Earnings

Google’s parent company Alphabet has reported its quarterly earnings and the company’s earnings have surpassed the estimates of analysts. The company beat the earnings per share expectation of $23.48 per share, according to Refinitiv. It had earnings per share of $27.99 per share in the third quarter. The company realized revenue of $65.12 billion versus the $63.34 billion that was expected of it, according to estimates from Refinitiv.

For YouTube Advertising Revenue, the company realized $7.2 billion, falling short of the expected estimate of $7.4 billion. Google Cloud Revenue also fell short of expected of $5.07 billion; the company realized $4.99 billion in the third quarter. Traffic Acquisition Costs (TAC) realized for the quarter stood at $11.50 billion versus the $11.16 billion that analysts expected.

Apple’s new App Tracking Transparency (ATT) feature has been affecting the ad business of virtually all tech and digital companies that thrive on online ads. For instance, Snap Inc. third-quarter earnings were badly affected by the new Apple feature. Google has, however, managed to rise through the challenges posed by this new change Apple imposed. Google is able to do this majorly because it owns the Android operating system which is the direct rival to Apple’s iOS. On a call with analysts, Alphabet’s finance boss – Ruth Porat, said that the new privacy features had a “modest impact on YouTube revenues” while adding that “focusing on privacy has been core to what we’ve been doing consistently.

Google saw its advertising revenue rise 43 percent to $53.13 billion in the third quarter and is up from $37.1 billion the company recorded in the same period in the previous year. YouTube ads rose to $7.21 billion, up from the $5.04 billion recorded in the same period a year ago. Its stock is also up more than 55 percent this year, which is more than double the gains in the S&P 500. The rise in its stock comes from the investors’ belief that Google would be able to scale its operations as the economy is gradually reopening and the trust that the company can handle imminent regulatory changes and actions.

Google’s Chief Business Officer – Philipp Schindler noted that retail was the biggest contribution to the company YoY ad growth. He also noted the significance of Media and finance spending. “We continue to see a lot of unevenness. It is clear that uncertainty is the new normal”, he said referring to the different rates of recovery by various countries.

Alphabet has been investing hugely in Google’s cloud division so as to be able to keep up with the competition from its rivals – Amazon Web Service and Microsoft Azure, and it is only expected that the unit sees some amount of growth. Google’s cloud business saw a 45 percent growth and realized $4.99 billion in the third quarter while operating loss fell to $644 million from $1.21 billion.

Alphabet’s Other Bets segment which covers its self-driving car company Waymo saw a revenue increase of $182 million from $178 million. Losses, however, increased to $1.29 billion from $1.1 billion a year ago. The company reported a profit on investments of $188 million in the third quarter and the figure is up from the profit of $26 million from a year ago. According to Ruth Porat, Alphabet’s workforce increased by 6,000 employees in the third quarter and it hopes to grow this number by the next quarter.

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