Alphabet Earnings: Google Cloud Revenue Run Rate Tops $12B

Daniel Fowler
July 31, 2020

Alphabet Inc.'s revenue growth machine ground to a halt for the first time in the company's two-decade history, stopped by the coronavirus pandemic and ensuing economic fallout that forced advertisers to pull back spending.

Despite the dip, the company's stock remained steady after-hours.

Why it matters: The company may have fared better than investors were expecting, but the company remains nearly entirely dependent on ad revenue and experienced a hard quarter.

The chief financial officer of Alphabet and Google Ruth Porat said in the earnings call that a gradual improvement in advertising managed to drive the revenue.

Google shares, which have gained 15% this year, rose about 0.5% in extended trading following the report.

"We believe it is premature to gauge the durability of recent trends given the obvious uncertainty of the global macro environment", she said.

Ad sales, which make up the bulk of revenue at the Google parent, were $29.9 billion in the second quarter, down 8.1% from the same period past year.

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As for Alphabet's "other bets" - it's longer term gambits such as self-driving vehicle company Waymo and health tech unit Verily - the company reported revenue of $148 million, down year-over-year by about 8%.

Alphabet and Google CEO Sundar Pichai said that the company has been working hard to weather the current social and economic environment, and remains committed to helping its partners in business and education, as well as its general consumer base, make the best out of conditions through its properties like G Suite, Youtube, and Google Cloud.

Competition regulators across the Americas, Europe and Asia are weighing whether Google has stifled competition on its way to dominating search, mobile software and other businesses, with some bodies even considering forcing it divest parts of its ad operations.

Other bets (such as Waymo) recorded revenue of $148 million and lost $1.116 billion. Google ended the quarter with 127,498 employees, up 18% from the quarter a year earlier. That doesn't include contractors.

Spending and hiring will continue for the cloud business, Porat said.

Google is also facing antitrust probes along the same lines by the Department of Justice and 50 attorneys general investigating Google company's search and Android businesses. He added that the company will "adapt".

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