Google Results Top Expectations

Posted on July 26, 2019 by Paul Thurrott in Google with 16 Comments

As part of its quarterly earnings announcement, Alphabet announced explosive growth at Google, which easily surpassed expectations.

Alphabet posted net income of $9.95 billion on revenues of $38.9 billion for the quarter ending June 30. That’s 19 percent gain in revenues year-over-year, which is impressive enough. But Alphabet’s income more than tripled YOY.

As is always the case, Google represented the vast majority of those sums: Alphabet reported that Google posted an operating income of $10.4 billion (up almost 16 percent YOY) on revenues of $38.8 billion (up 19.3 percent YOY).

“Our effort to build a more helpful Google for everyone brings countless opportunities to help users, partners, and enterprise customers every day,” Google CEO Sundar Pichai said in a prepared statement. “From improvements in core information products such as Search, Maps, and the Google Assistant, to new breakthroughs in AI and our growing Cloud and Hardware offerings, I’m incredibly excited by the momentum across Google’s businesses and the innovation that is fueling our growth.”

Google’s revenues from advertising were $32.6 billion, or 81 percent of its total revenues, and a gain of 16 percent YOY. A year ago, advertising was 84 percent of Google’s revenues. In the previous quarter, Google’s ad sales were soft, so the positive results this time around quelled investor fears that Google’s core business was slowing down.

Google highlighted its Google Cloud business, noting that it reached an annual run rate of $8 billion, double the number from a year ago. This suggests that Google Cloud generated revenues of about $2 billion in the quarter, a far cry from the $8.4 billion that Amazon AWS generated in the same time period; indeed, AWS posted a profit of $2.1 billion in the quarter. Google is a distant number three after AWS and Microsoft Azure in this market. Microsoft’s commercial cloud business posted revenues of $11 billion in this past quarter, but Azure is only part of that business unit.

Google didn’t disclose anything about regulatory concerns as part of its financial results. But the firm separately stated that it was “engaging” with the U.S. Department of Justice in the wake of news that the regulatory agency was investigating the firm and other Big Tech companies for antitrust violations. “We understand there will be scrutiny,” Mr. Pichai said.

Join the discussion!

BECOME A THURROTT MEMBER:

Don't have a login but want to join the conversation? Become a Thurrott Premium or Basic User to participate

Register
Comments (16)

16 responses to “Google Results Top Expectations”

  1. MikeGalos

    So Google's revenues were 81% advertising. What was the percentage of Google's profits from advertising?


    What other businesses provided profits for Google, for all of Alphabet? What other Alphabet income sources were there and what industries were they in? How much did they contribute to Alphabet's profits? How small are the other Alphabet income sources if they could triple and yet only show a 19% gain in profits?


    Lots of questions still unanswered.

    • Pungkuss

      I remember when Google's ad business was 97% of their revenue. That seems to be 81% this quarter even when the ad business itself had a strong quarter. I think the cloud is a big enough business for all three, Google does not have to be exceptional in the cloud to have a successful business. They hope that one of their other projects bets take off and then it would be a three headed beast. Ads, cloud and other bet(maybe something in healthcare).
      In reply to MikeGalos:


      • jrickel96

        In reply to Pungkuss:

        Revenues are growing elsewhere, but are they profitable revenues?


        As of last year about 50% of Google Cloud Platform revenues (GCP) were G-Suite. This is analogous to Microsoft's own Azure usage for Office 365 - though O365 has much higher per seat averages across the board. G-Suite had 5 million subscribers at the beginning of the year.


        They don't break down each division, but general assumption is Ads make up roughly 90% of their profits nowadays. They are seeing some erosion in per click rates, so there is concern long term about continuing to grow profit in that sector - and their Cloud side is growing, but not growing at a fast pace.


        Remember that higher ticket items with lower margins such as the Pixel 3 and Pixel 3a also come into play here. These are likely profitable lines, but I doubt they are getting Apple margins at the end of the day - especially with some fairly extensive problems with a few of the products.


        Google is still primarily a single revenue company as their power and revenue would be drastically reduced if one business in their company suffered losses.

        • Pungkuss

          Nothing is gonna be as profitable as software. The money left on the table for all these giant software companies will require spending a ton of money. Amazon has always spent a ton of money. When trying to diversify it's ok for Google to spend almost as much as they make on new businesses. There is a reason I didn't mention net profits. In the long run these other businesses will be more profitable. At least the market seems to think so.
          In reply to jrickel96:


          • jrickel96

            In reply to Pungkuss:

            Google has dumped a lot of money into new ventures that have failed. Reality is that Google has a poor track record of developing profitable businesses beyond its core. There's a lot of suspicion that G-Suite itself is not profitable and may be a break even business at best, but Alphabet does not want to break down the numbers.


            It is certainly okay to drop money to develop a business. The market is responding to the large profits still netted by their ad business. As I said, Google has not shown the ability to really grow new businesses. They are still one of the most vulnerable of the top 5 market cap companies if a major paradigm shift occurs. On the other side, Microsoft has the most diverse revenue of the Top 5 market cap companies.

            • Pungkuss

              Of course they have. They lost almost 1 billion last quarter on other bets. That's fine if in 5 years they get 1 hit from the group. Cloud (which includes gsuite) is growing quickly and even though TAC costs are high and increasing, the ad business growth kept pace this quarter. YouTube looks like it's pulling in more dough than ever before. I think alphabet is firing on all cylinders right now. Who knows if regulation looks, but for now they seem fine. The 9% stock bumb is justified.

              In reply to jrickel96:


      • MikeGalos

        In reply to Pungkuss:

        97% of their revenue or 97% of their profits? Remember, they used to spend a lot of ad profits on their "loss leader but it brings in eyeballs for the ad side" businesses. And still do.

        That's part of why I asked those questions.

    • nicholas_kathrein

      In reply to MikeGalos:

      If waymo takes of in the next few years that business could easily move 81 % advertising to 50 % or less. There is a massive opportunity in driver less taxi services if you can get it right.

  2. nicholas_kathrein

    Looks like Google still has not much to worry about when it comes to Facebook and Amazon stealing all their customers for advertising. Hopefully they can continue to increase in other areas like cloud with Youtube TV, Stadia, and Google cloud. Maybe even Waymo.

  3. Thom77

    I think it would of been relevant to mention the BILLIONS of tax subsidies Google receives and the tax loopholes Google is still taking advantage of overseas because of their grace period til 2020, where they created shell companies to evade taxes which I am pretty sure none of us would go to prison for but instead get a 3 year grace period to continue doing so.


    By the way, go to Google and search "how much does Google pay in taxes". My search results was mostly about Amazon not paying any taxes.


  4. Tony Barrett

    I think you'll find Google's cloud business is growing at a faster rate than AWS. It may still be small in comparison, but growth is a key factor. AWS growth has actually slowed, which is strange.

    Still, Amazon, Microsoft and Google are the three big players in Enterprise cloud, and it will remain that way by the looks of it.

    • dontbe evil

      In reply to ghostrider:

      of course, AWS is already the top player... for google cloud is faster to grow from 1% to double to 2% (just an example)

    • MikeGalos

      In reply to ghostrider:

      And, really, individual growth RATE isn't an important comparison since, as the individual growth rate looks impressive when you're a small player since going up by 5 looks big when you start at 3 but going up by 10 looks small when you start at 30.


      Now add to that another factor, you really want to compare not rate of growth but rate of share in the market since if the market is growing by a bigger factor that the individual company they're losing importance.


      And then, on top of all of that is figuring out which market matters. "Cloud" can mean anything. Is a storage only system a "cloud" company or do you just want to include companies that offer services? Do you want to include those that have their customers doing nothing but hosting in the cloud? Of those do you want to include those that offer actual infrastructure as a service or do you include web hosting companies? Or do you only want to count those services that offer compute in the cloud? Those with their own distributed APIs or those who offer hosted VMs for virtualized existing OS images? How about those that offer a proprietary service rather than generalized computing?


      Getting the idea of how meaningless it is to compare "cloud" companies, yet?

  5. Michael Rivers

    Thoughts a prayers out to any Google employees injured in the growth "explosion."

Leave a Reply