Alphabet posts significant Q1 revenue jump, but expects tough times ahead

29 Apr 2020201 Views

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Alphabet revenue was up in Q1 2020, but the company has warned of a ‘significant slowdown’ in ad revenue brought on by Covid-19.

In its earnings report for the first quarter of 2020, Google parent company Alphabet posted revenues of $41.2bn, with a net income of $6.8bn. This represents a 13pc year-on-year increase in revenue, beating analyst exceptions. However, there was just a 1.5pc increase in net income.

The company also warned of a “significant slowdown” in its advertising business, which generates the bulk of Alphabet’s revenue and profit.

Two of the company’s best performing products in the last quarter were YouTube – which saw revenues jump by 33pc to $4bn in Q1 – and Google Cloud, where there was a 52pc jump in revenues to $2.8bn.

Other bright spots financially were Alphabet’s products classed as ‘Google other revenues’, which made $4.4bn in the quarter, up 22pc on the previous year. This includes subscription services such as Google Play Music and YouTube Premium.

However, revenue was down in its ‘other bets’ segment – which includes Waymo and other research and experimental divisions. This saw a $1.1bn operating loss in the quarter.

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In a statement, Alphabet and Google’s CFO, Ruth Porat, prepared investors for the possibility of bad news in the next quarter as the massive shock to the global economy brought on by Covid-19 becomes more apparent.

‘We are sharpening our focus’

“Performance was strong during the first two months of the quarter, but then in March we experienced a significant slowdown in ad revenues,” Porat said. “We are sharpening our focus on executing more efficiently, while continuing to invest in our long-term opportunities.”

In a follow-up call, Alphabet CEO Sundar Pichai said that Google’s product use has risen considerably since the acceleration of the pandemic, with people using search, YouTube and other apps to find information about Covid-19. However, he added that engagement has shifted considerably towards Covid-19 content and ad revenues have suffered.

Porat said the company expects ad revenue challenges to continue into the next quarter.

“The decline in our search and other ads revenue was abrupt in March, and although we’re seeing some early signs at this point that users are returning to more commercial behaviour, it’s not clear how durable or monetisable that will be,” she added. “As of today, we anticipate that the second quarter will be a difficult one for our advertising business”.

According to CNBC, the company’s better-than-expected results saw its shares rise by 7pc in extended trading at $9.87 per share.

Colm Gorey is a senior journalist with Siliconrepublic.com

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