Alphabet reports second quarter revenues up 62% YOY to $61.9bn

Alphabet Inc – the owner of Google – has announced its financial results for the quarter ended June 30, 2021.

Alphabet reported second quarter revenues of $61.9bn, up 62% year-on-year and far better than the market expected. That reflects increased online activity by consumers, underpinning an 83.7% rise in YouTube ad revenue, as well as broad based advertising demand in search and elsewhere.

A rise in operating costs of just 33.2%, including a 13% increase in headcount, meant operating profits mor than tripled to $19.4bn.

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.

All other divisions remained loss making. However, Google Cloud saw losses narrow from $1.4bn a year ago to $591m in the second quarter of this year. Other Bets revenue rose to $192m, with an operating loss of $993m.

Free cash flow in the quarter rose from $8.6bn last year to $16.4bn. Net cash at the end of the quarter stood at $121.5bn, compared to $122.8bn at the start of the year, as the group spent $24.2bn on share buybacks.

Sundar Pichai, CEO of Google and Alphabet, said: “In Q2, there was a rising tide of online activity in many parts of the world, and we’re proud that our services helped so many consumers and businesses. Our long-term
investments in AI and Google Cloud are helping us drive significant improvements in everyone’s digital
experience.”

Ruth Porat, CFO of Google and Alphabet, said: “Our strong second quarter revenues of $61.9 billion reflect elevated consumer online activity and broad-based strength in advertiser spend. Again, we benefited from excellent execution across the board by our teams.”

Industry reaction

Nicholas Hyett, Equity Analyst at Hargreaves Lansdown said: “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.”

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