Google’s parent company Alphabet Inc. met street expectations on Thursday despite a drop in advertising that hurt the company for the second consecutive quarter.
The company Herzegovina,
GOOG,
reported net income of $ 6.96 billion, or $ 10.13 per share, compared to net income of $ 9.95 billion, or $ 14.21 per share, in the prior year quarter. Revenue after eliminating traffic acquisition costs decreased to $ 31.6 billion from $ 31.7 billion in the same period last year.
Analysts surveyed by FactSet had estimated $ 7.95 per share in ex-TAC revenue of $ 30.66 billion on average.
The second-quarter results, announced after the market closed on Thursday, initially caused Alphabet shares to rise 2% in after-hours trading. But the results sank after investors digested a $ 2.6 billion decline in advertising revenue year-over-year.
“We continue to navigate through a difficult global economic environment,” Alphabet chief financial officer Ruth Porat said in a statement announcing the results on Thursday. She noted an improvement in ad sales as the quarter progressed.
“We are all dealing with an uncertain and pandemic economy,” Alphabet chief executive Sundar Pichai added in a conference call with analysts later.
Although $ 29.9 billion of Google’s total quarterly revenue of $ 38.3 billion comes from advertising, underscoring its reliance on a struggling market, there were bright spots. Google Cloud and YouTube sales continued to rise in a growing sign of versatility across the company’s overall product line: YouTube ad revenue increased 6%, to $ 3.8 billion from $ 3.6 billion a year ago, while Google Cloud sales grew 43%, to $ 3 billion from $ 2.1 billion.
Google’s soft sales, especially in travel, affected performance in its previous quarter and will likely continue throughout the year. Monness Crespi Hardt analyst Brian White cautions that Google is not only facing increased competitive pressure from Facebook Inc. FB,
, Amazon, Snap Inc. SNAP,
and Twitter Inc. TWTR,
but serious antitrust investigations into his advertising business.
Read more: Google is being hit by a weakening ad market that has cut more than $ 8 billion in sales expectations
In a nod to the Amazon.com Inc. AMZN competition,
, Google said last week that it will remove retailers’ commissions. “In the long term, I see an opportunity for growth,” Pichai told analysts during the call.
Google is navigating an industry battered by the pandemic in the spring and preparing for another difficult quarter if a second national shutdown occurs. The good news is that digital advertising is getting the lion’s share of the expense, at the expense of broadcast and print media.
“There is an obvious truth that in announcing a large majority of spending it tends to come together in the second half of the year with Black Friday, the holiday season and the rush to spend your budget,” Julian Baring, general manager of America Media digital. Advertising company Adform told MarketWatch in a phone interview on Thursday. “On the other hand, when the economy slows down, advertising spending tends to come first.”
This makes the second half of 2020 even more crucial for Google, JMP Securities analyst Ron Josey told MarketWatch in a phone interview. Rate Google’s shares as best, with a target price of $ 1,500. “Google’s new reporting metrics are helpful.”
In the longer term, Josey and others are closely watching Google’s ad business antitrust investigations in the coming months and how it may affect operations. On Wednesday Pichai, Apple Inc. AAPL,
CEO Tim Cook, Amazon.com Inc. AMZN,
CEO Jeff Bezos, and Facebook Inc. FB,
CEO Mark Zuckerberg testified before the House about his business practices and enormous market power.
Read more: Antitrust questions bruises but doesn’t break Big Tech CEOs at historic hearing
Pichai was especially criticized for Google’s role as an intermediary in the online advertising market, its manipulation of search results to benefit the company’s bottom line, and accuses it of stealing content from developers.
When pressed during the regulatory climate conference call, Pichai said he is confident of Google’s focus on users and offering them many product options at lower prices. “We operate according to the rules, and if we need to change [business operations to adhere to rules]We will, “he said.
Alphabet’s shares rose 15% in 2020. The broader S&P 500 SPX Index,
down 0.% this year.
.
