Google generates the bulk of Alphabet’s revenue and profit, which are, in turn, largely generated by advertising incomes. Alphabet’s advertising revenue from search, YouTube, and its network generated 82% of its revenue in the first three months of the year.
Alphabet, the parent company of the world’s leading search engine Google, made US$41.16 billion in revenue for the first three months of this year.
The revenue increased 13% on the same time last year, ahead of analyst estimates of US$40.33 billion.
Alphabet’s Chief Financial Officer Ruth Porat noted a decline in later-quarter business, saying “performance was strong during the first two months of the quarter,” but that in “March (Alphabet) experienced a significant slowdown in ad revenues”. Alphabet CEO Sundar Pichai acknowledged during a conference call that the company’s ad sales had been “significantly impacted” during March and that the pain has spilled into this month.
Both Pichai and Porat emphasised that people are using Google’s search engine and YouTube video service more than ever under stay-at-home coronavirus pandemic restrictions, a trend that could lead to further gains when the global economy recovers.
Google generates the bulk of Alphabet’s revenue and profit, which are, in turn, largely generated by advertising incomes. Indeed, the company’s advertising revenue from search, YouTube, and its network generated 82% of its revenue in the first three months of the year.
Alphabet earned US$6.8 billion during the quarter, a 2% increase from last year. Alphabet’s stock climbed 8% to US$1,336.98 in after-hours trading. If the shares follow a similar trajectory in regular trading on Wednesday (US time), they will be about 10% below the peak reached in February.
“Things don’t sound quite as bad as some people had feared,” said Edward Jones analyst David Heger.
Facebook, the second largest seller of digital ads behind Google, is expected to also disclose a dramatic slowdown on Wednesday when it’s scheduled to release its January-March numbers.
The current April-June quarter is expected deliver even grimmer news, given that major advertisers such as airlines, hotels and other travel-sensitive businesses have little reason to reach consumers unable or unwilling to take usual summer vacations.
“We anticipate the second quarter will be a difficult one for our advertising business,” Porat said during the conference call.