Google’s profits soar as revenue rises 62 percent.

Alphabet initially was seen as vulnerable to the pandemic, but has come out of it stronger.

Advertisement

Continue reading the main story

Google’s profits soar as revenue rises 62 percent.

Sundar Pichai, Google’s chief executive, in May. He credited “a rising tide of online activity” for the results. Credit…Google/Via Reuters

July 27, 2021, 6:37 p.m. ET

Alphabet, Google’s parent company, just made in three months what it took until recently an entire year to earn. That is a level of growth that companies of its size rarely if ever achieve, but the pandemic has erased all the limits for tech firms.

The search and advertising company on Tuesday reported record profits and revenue for the second quarter, vindicating the enthusiasm of investors who doubled its value on the stock market since early last year. The stellar results pushed shares up modestly in aftermarket trading.

Alphabet said it made a profit of $18.5 billion, or $27.26 a share, for the quarter. As recently as 2015, it made less than that all year. Analysts did not see it coming, estimating on average that the company would earn only $19.14 a share in profit. Even the most optimistic analyst only forecast $24.43.

Sundar Pichai, Google’s chief executive, credited “a rising tide of online activity” for the results. Revenue rose 62 percent to $61.88 billion from a year ago, a level of increase unseen since the company’s rapid growth around 2005, when it was still a start-up.

With a market capitalization nearing $2 trillion, Alphabet is about as far from a start-up as is possible. Like Amazon and Facebook, it is frequently criticized for wielding its power unfairly, a charge the companies deny. Bills introduced in the U.S. House would restrict the big tech firms, and President Biden has named critics of Big Tech to key regulatory positions.

The pandemic profits the companies are making will likely only increase calls for action.

“Regulators at the moment are probably the biggest potential roadblock for Alphabet,” said Dave Heger, a communications analyst for the brokerage Edward Jones. “But antitrust lawsuits will take years. In the interim the company will continue to grow and add value to advertisers. History is probably in its favor.”

Alphabet, like the other big tech companies that offer tools to communicate, shop, be entertained and work remotely, initially was seen as vulnerable to the pandemic. In the second quarter of 2020, the first full quarter in which the virus was rampant, Alphabet’s revenue was off a bit as advertisers recalibrated. But it wasn’t down by much and it didn’t last.

As advertisers realized the world would not end, they returned in force. This helped not only Google’s main search engine but also the YouTube video division. YouTube’s ad revenue was up 84 percent in the second quarter from the same period in 2020. In a conference call on Tuesday, Google executives talked about how the pandemic had pushed YouTube into becoming more of an e-commerce site.

Even the cloud storage business, where Alphabet is a perennial also-ran to Amazon and Microsoft, did well: Revenue jumped 50 percent and losses slowed.

The growth took a few more workers. Alphabet hired more than 16,000 people over the last year, bringing its total employment to 144,000.

Leave a Reply