Alphabet Inc. (GOOGL) reported revenue of $65.11 billion for Q32021, improving by 5% on previous Q22021 revenue of $61.88 billion.
This was above analyst’s estimates of $15.89 billion, however, analysts were disappointed with the returns posted by its YouTube and Cloud division. Advertising revenue was the driver with the retail, travel and entertainment industries aggressively marketing online due to the COVID-19 pandemic scenario. The Search and other related businesses also continued sales worth of $37.9 billion. YouTube and the cloud division posted revenue of $7.2 billion and $4.99 billion respectively, both falling short of expectations of $7.5 billion (-4%) and $5.04 billion (-0.9%) respectively. The company also noted the ongoing impact of privacy changes by Apple having a ‘modest impact on YouTube’, while it’s cloud division still lags behind competitors/ leaders Amazon and Microsoft. On the company’s revenue performance, the company’s Chief Executive Officer Sundar Pichai stated:
“It was modestly off of the street’s estimate, but we feel very good with the momentum,”…..“We are very pleased with the ongoing progress across the board, the product innovation, the buildout of our teams and the strength across verticals.”
Net income increased by 2.2% to $18.94 billion for Q32021, compared to $18.525 billion for Q22021, also beating estimates of $15.89 billion (19%). Alphabet’s forecasted net income for Q42021 is expected to be $17.186 billion, with the Pichai warning of the impact on future sales from Google’s App store on the back of pressure from regulators and software developers as well as the passing of the initial increase in usage at the start of the pandemic. Pixel 6 smartphones, from it’s hardware unit, is also facing difficulties in sourcing supplies, however, the executive spoke on these concerns. The executive stating:
“We’ve been risk-managing the supply-chain challenges well,”……..“we are working closely with suppliers and logistics partners to plan and pivot when and where we need. With the strong reviews and demand on the Pixel 6, we do expect some supply constraints.”
The EPS for Q32021 was $27.99, up by 2% from Q22021 of $27.26, and 19% compared to analysts’ estimates of $23.50. Alphabet had repurchased $12.6 billion of share in Q22021, with Porat stating on the earnings call to continue investing in servers, real estate and increase headcount in its Google Services and cloud division (150,028 employees as at Q32021).
The company’s share price share price declined as much as 1% in extended trading having reported after the market close. Analysts continue to maintain a bullish outlook for the stock with 96% maintaining a buy recommendation, with an average 12-month price target of $3,211 and increase of 15% based on the current price.
