Alphabet, Google’s parent company, posted better-than-expected second quarter earnings on Thursday, July 30, but suffered the first revenue decline in its history, thanks to the Covid-19 crisis.
Consensus Refinitiv estimates had envisioned Alphabet’s earnings per share for the period of $8.21 with total revenue of $37.37bn. In reality, the company posted EPS of £10.13 and revenue of $38.3bn (£29.1bn, €32.3bn).
While this figure surpassed analyst expectations, it nonetheless marked a 2 per cent decline from the second quarter of 2019. Having stood at $9.9bn in that same period, Alphabet’s net income fell to $6.9bn. Tech giant’s revenue for search similarly declined from $23.6bn to $21.3bn.
Announcing the figures, CFO Ruth Porat stated: “We continue to navigate through a difficult global environment.”
In an earnings call, Porat observed that consumers were returning to more “commercial” search queries towards the end of the quarter and that advertisers had started to ramp up their search spending.
The executive added that she was “cautiously encouraged” by Alphabet’s growth towards the end of the period. “We believe that it's premature to gauge the durability of recent trends given the obvious uncertainty of the macro environment,” she maintained.
CEO Sundar Pichai similarly observed: “We saw the early signs of stabilisation as users returned to commercial activity online.”
With billions of people forced to stay at home as a result of lockdown measures, a number of Alphabet’s ventures actually thrived in the second quarter. Pichai highlighted the “good traction” in Google Play and YouTube subscriptions. Indeed, the popular video-sharing platform’s advertising revenue beat analyst estimates of $3.78bn, coming in at $3.81bn.
While such resilience will no doubt buoy market sentiment, Alphabet still has a number of obstacles to overcome in the coming months and year. Most notably a slew of anti-trust investigations on both sides of the Atlantic.
Referencing these probes, Pichai emphasised Alphabet’s ability to “adapt” and stated: “I think the scrutiny is going to be here for a while.”
Alphabet closed Thursday trading up 0.62 per cent at $1,531.45, more than 14 per cent higher than its 2020 starting point.