RESEARCH TRIANGLE PARK — Google’s digital advertising network has shifted back into high gear, with its corporate parent reporting profit that more than doubled after an unprecedented setback during the early stages of the pandemic. Plus, cloud computing from Google is helping customers capitalize on digitalization, triggered in part by responses to the pandemic.
Sundar Pichai, CEO of Google and Alphabet, noted the trends in his summary of Tuesday’s earnings report: “Over the last year, people have turned to Google Search and many online services to stay informed, connected and entertained. We’ve continued our focus on delivering trusted services to help people around the world. Our cloud services are helping businesses, big and small, accelerate their digital transformations.”
Highlights: CEO on ‘suddenly’ changing world
From Sundar Pichal’s earnings conference call:
When I last spoke with you in early February, no one could have imagined how much the world would change, and how suddenly. Our thoughts are with everyone who has been impacted by COVID-19, especially those who’ve lost loved ones or their livelihoods. It’s a challenging moment for the world.
Through it all, we’re incredibly grateful for all of the essential workers on the front-lines of this crisis, from health care workers and first-responders, to the grocery store clerks and delivery workers, to teachers grappling with new technology to help children learn remotely, to all of the scientists and researchers working hard to develop vaccines and treatments, and many others who are leading through these difficult times. Thank you. These people fill us with hope and show us the power of human resilience. We’ll need that energy and
resolve in the months and years ahead.
Today, there is still a great deal of uncertainty regarding the path to recovery. But there are some things that we can understand better with the patterns we are seeing. For example, it’s clear from data that people are being more cautious and are seeking authoritative advice and guidance to protect their families’ health and safety. A return to normal economic activity depends on how effectively societies manage the spread of the virus. There’s no one size fits all and the timing and pace of recovery will vary from location to location. This is a long-term effort.
It’s also clear that this is the first major pandemic taking place in a digital world.
The cloud’s growing importance to Google is reflected by the fact the tech giant expanding its cloud efforts with a new engineering center in Durham where it expects to employ 1,000 people.
Added Chief Financial Officer Ruth Porat: “Total revenues of $55.3 billion in the first quarter reflect elevated consumer activity online and broad based growth in advertiser revenue. We’re very pleased with the ongoing momentum in Google Cloud, with revenues of $4.0 billion in the quarter reflecting strength and opportunity in both GCP and Workspace.”
The robust first-quarter advertising growth provides the latest sign that advertisers are expecting the economy to roar back to life as more people get vaccinated against COVID-19 and burst out of their pandemic cocoons.
That is particularly true in the travel industry, a key part of the ad market that drastically curtailed its spending last year after governments around the world imposed lockdowns to prevent the spread of the novel coronavirus.
Google picks Durham for engineering hub, aims to create 1,000 jobs
Google vast digital ad empire is now benefiting from that recovery, although company executives warned in a conference call that another wrong turn in the pandemic could discourage recent consumer splurging that’s also spurring advertisers to spend more.
“It’s too early to say how durable this consumer behavior will be as economies recover and restrictions on mobility are lifted,”Porat.
Google’s sales surged 32% from the same time last year to nearly $45 billion during the January-March period. It’s the third consecutive quarter of accelerating ad growth for Google following an 8% decline during last year’s April-June period. That marked the first time Google’s quarterly ad revenue had fallen from the previous year since the company went public in 2004.
The resurgence enabled Alphabet to easily surpass the analyst estimates that help set investor expectations.
The Mountain View, California, company earned $17.9 billion, or $26.29 per share, more than double what it reported the same time last year. The profit was inflated by an accounting change of $650 million, or 97 cents per share.
Total revenue, which also includes Google’s cloud-hosting service and device sales, climbed 34% from last year.
Analysts had projected earnings of $15.76 per share on revenue of $51.5 billion, according to FactSet. The performance pleased investors, who drove up Alphabet’s stock by 4% in extended trading after the numbers came out.
Aside from the one-quarter downturn in ad revenue, Google has mostly thrived throughout the pandemic as people became more dependent on its services — a phenomenon that has strengthened other technology stalwarts such as Apple, Amazon, Microsoft, Facebook and Netflix.
Alphabet’s stock is trading above $2,300, nearly double its price when the pandemic was declared 13 months ago. Alphabet’s market value is now nearly $1.6 trillion. And if Alphabet’s shares follow the same trajectory during Wednesday’s regular trading session, the stock will hit a new peak.
Google’s critics contend much of its success has come through anti-competitive practices tied to the dominance of its search engine, which has become the de facto gateway into the digital world. Those complaints culminated in a series of lawsuits filed by U.S. regulators last year in cases aimed at reining in Google’s ability to expand, if not forcing a break of its services.
But the main lawsuit filed by the U.S. Justice Department isn’t scheduled to go to trial until September 2023, leaving Google ample time to extend its tentacles even further while fighting a case that it contends is unfounded.
Google’s YouTube video site remains one of the company’s fastest rising stars, with ad revenue increasing 49% from last year to $6 billion. The company’s cloud-computing service is also rapidly expanding; its revenue shot up 46% from last year.
