3 key takeaways from Alphabet’s Q1 earnings report

Alphabet Inc. (NASDAQ: GOOGL) published its earnings report for the fiscal first quarter on Tuesday that topped analysts’ estimates for earnings and revenue.

1. Financial performance

Alphabet reported £12.90 billion of net income in the first quarter that translates to £18.91 per share. In the comparable quarter of last year, its net income was capped at a lower £4.92 billion, or £7.10 per share. In the prior quarter (Q4), Alphabet’s net income registered at £11.15 billion.

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Excluding traffic acquisition costs, the American multinational’s revenue printed at £32.80 billion versus the year-ago figure of £24.24 billion. Overall revenue jumped 34% in Q1 to £39.77 billion. According to FactSet, experts had forecast £37.08 billion of total revenue and £11.33 of earnings per share.

2. Sales from individual business segments

At £22.94 billion, Search sales were better than the same quarter last year. Alphabet saw a 49% annualised growth in Q1 YouTube ad sales. Google’s Cloud revenue, the California-based company added, climbed by 46% in the first quarter.

Operating margin, the parent company of Google said, improved in the recent quarter to 30% from 19% last year.

3. Share repurchase programme

Alphabet’s board authorised an additional £35.96 billion of share buyback (Class C capital stock) on Tuesday. Referring to her conversation with Alphabet’s CFO Ruth Porat, CNBC’s Deirdre Bosa said on ‘Closing Bell’:

“She (Ruth Porat) mentioned that the additional $50 billion buyback was part of the continuation of their existing programme. She said the primary use of the capital is still to support long-term growth. They’re going to be investing it back into the business. She did, however, note that the pace of buyback has increased over the last few years.

Commenting on if it’ll be another investment year for the Cloud business and whether they’d be looking for profitability, Bosa quoted Porat as having said:

“There’s still a sizeable opportunity, so there’s approach there has not changed.”

Bosa also highlighted the CFO’s remarks on privacy, who said:

“Privacy is absolutely core to what we do. No question, the privacy landscape is changing, and regulation is rapidly evolving. Like regulators, she said, we want to protect users.”

Impact on the share price

Alphabet Inc. shares jumped close to 5% in after-hours trading on Tuesday to trade at £1,722.53 per share – a record high for the Nasdaq-listed company. In comparison, it had started the year at £1,241.37 per share.

At the time of writing, Alphabet is valued at £1.11 trillion and has a price to earnings ratio of 36.62.