Yahoo Finance GOOGL Stock: Earnings Spell Success for Alphabet
Technology company Alphabet, best known for its ubiquitous search engine Google (GOOG, GOOGL) that has a dominating market share of the internet, thrilled Wall Street on Thursday by reporting earnings that topped analysts' most lofty expectations.
Alphabet reported second-quarter revenue of $21.5 billion and earnings per share of $8.42, an increase of 21 percent from the same quarter a year ago. Wall Street had expected earnings of $20.76 billion and EPS of $8.03.
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The positive earnings report sent GOOGL stock more than 5 percent higher in after-hours trading on Thursday, as the Class C GOOGL stock leapfrogged to more than $800 per share. The company's Class A stock, which trades as GOOG, also moved more than 3 percent higher to more than $770 per share.
Alphabet's positive earnings report added to a good week for Wall Street's major tech stocks. Facebook (FB) and Apple (AAPL) also reported strong earnings this week, as did Amazon.com (AMZN) on Thursday.
"What is most notable is that for the second day in a row, a tech giant has posted impressive numbers from both a top-line revenue and a bottom-line earnings perspective," says Sean O'Hara, president of Pacer ETFs, which holds Alphabet in two of its funds. "There are many things that both results have in common, but the most interesting is the commonality in the drivers: mobile and video. Both are strikingly similar in what they are attributing their excellent results to."
Another growth area for Alphabet is its highly successful YouTube service, which has more than 1 billion users and is becoming more attractive as an entertainment medium as cord-cutting increases.
"With 1 billion users and seven products, the shift in advertising dollars to mobile will drive growth for GOOGL for several years," says Tara Hedlund, senior vice president of Pennsylvania Trust in Radnor, Pennsylvania. "Advertising is 90 percent of GOOGL revenues and close to 50 percent of that comes from mobile."
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Prior to Thursday's earnings, GOOGL stock had been somewhat of a disappointment -- down more than 2 percent for the year and threatening to squander 2015's outsized gains. It raised eyebrows last year by announcing it was changing its name to Alphabet, saying that it would be a "collection of companies." Google's products chief, Sundar Pichai, became CEO of Google, while company co-founder Larry Page became CEO of Alphabet. Co-founder Sergey Brin became president of Alphabet.
The company also showed signs this year of expanding its reach. Subsidiary Google Capital took a large stake in Care.com (CRCM) and took a seat on the CRCM board as the company's largest single investor. It's the first time that Alphabet has taken a position in another publicly traded company, and evoked comparisons to how Warren Buffett expanded the holdings of his highly successful company, Berkshire Hathaway (BRK.A, BRK.B).
Such moves are critical for GOOGL stock to be known for anything more substantial than search and advertising revenue with its powerful search engine. Google makes nearly 90 percent of its revenue from search engine ads. The company has said it wants to diversify that income stream ideally by ramping up its cloud computing income. Urs Holze, senior vice president of technical infrastructure, predicted in 2015 that the company's cloud revenues would surpass its advertising revenues by 2020.
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Revenue from Google's search engine accounted for $21.3 billion -- the company lost $859 in what it calls its "other Bets" segment of emerging businesses, but still managed to increase revenues in that segment from $74 million a year ago to $185 million in this quarter.
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