Parent of Google Alphabet Inc. met expectations on the street on Thursday, despite a drop in advertising that backed the company for a second straight quarter.
reported net income of $ 6.96 billion, or $ 10.13 per share, compared with net income of $ 9.95 billion, or $ 1
Analysts surveyed by FactSet had valued $ 7.95 a share in the former TAC revenue averaging $ 30.66 billion.
The second quarter results, announced after the market close Thursday, initially sent alphabet shares up 2% in after-hours trading. But the results plunged flat as investors spent a $ 2.6 billion drop in advertising revenue for one more year.
“We continue to navigate through a difficult global economic environment,” Chief Financial Officer Alphabet Ruth Porat said in a statement announcing the results Thursday. She noted the improvement in advertising sales as the quarter progressed.
“We are all piling up with a pandemic and insecure economy,” Alphabet CEO Sundar Pichai added in a conference call with analysts later.
Although $ 29.9 billion of Google’s total quarterly revenue of $ 38.3 billion came from advertising, highlighting its dependence on a tough market, there were bright spots. Sales from Google Cloud and YouTube continued to inflate into a growing sign of versatility in the company’s overall line – YouTube ad revenue rose 6% to $ 3.8 billion from $ 3.6 billion a year earlier, while sales of Google Cloud grew 43%, to $ 3 billion from $ 2.1 billion.
Google smoothing sales, especially on travel, marked the performance of the previous quarter and are likely to continue throughout the year. Monness Crespi Hardt analyst Brian White warns Google not only faces increased competitive pressure from Facebook Inc. FB,
, Amazon, Snap Inc. SNAP,
, and Twitter Inc. TWTR,
but serious antitrust investigations about its advertising business.
Read more: Google is being squeezed out of a relaxing advertising market that has cut more than $ 8 billion in sales expectations
In a competition node from Amazon.com Inc. AMZN,
, Google last week said it would eliminate commission fees for retailers. “In the long run, I see an opportunity for growth,” Pichai told analysts during the call.
Google is navigating an industry badly beaten by the pandemic in the spring, and providing another rough quarter if a second national blockage occurs. The good news is that digital advertising is taking over most of the costs, at the expense of broadcast and print media.
“There is a truth that in advertising a large portion of spending tends to accumulate in the second half of the year with Black Friday, the holiday season and a rush to spend your budget,” Julian Baring, general manager of America at digital media advertising company Adform, told MarketWatch in a telephone interview on Thursday. “On the other hand, when the economy declines, advertising spending tends to go first.”
That makes the second half of 2020 increasingly important to Google, JMP Securities analyst Ron Josey told MarketWatch in a telephone interview. He rates Google shares as the highest, at $ 1,500. “Google ‘s new reporting metrics are useful.”
Long-term, Josey and others are keeping a close eye on Google’s advertising business antitrust investigations over the coming months and how it could 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 Chamber about their business practices and great market power.
Read more: Antitrust questions bruise, but do not spoil Big Tech CEOs in historic hearing
Pichai was particularly upset about Google’s role as an intermediary in the online advertising market, its manipulation of search results to profit the bottom line of the company, and allegations that it steals content from developers.
When pressed during the call for the regulatory climate conference, Pichai said he is confident in Google focusing on users and offering them plenty of product choices at lower prices. “We act according to the rules and if we have to change [business operations to adhere to rules], we will, “he said.
Alphabet shares rise 15% by 2020. The broadest S&P 500 SPX index,
has decreased 0.% this year.