In the latest demonstration of the strength of the internet advertising business, Alphabet (GOOGL), the parent company of Google, posted better-than-expected second quarter financial results, with growth picking up from what had been a disappointing first quarter.
For the second quarter, Google’s parent company posted revenue of $38.9 billion, up 19% as reported and 22% in constant currency, and well ahead of the Street consensus at $38.2 billion.
Non-GAAP profits were $14.21 a share, crushing the Street consensus forecast of $11.30 a share. The second-quarter results represent a re-acceleration of growth from the first quarter, when revenues were up 17%, or 19% in constant currency. Alphabet noted that its tax rate in the quarter was 18%, down from 24% a year ago.
Google Properties revenue was up 17.5%, faster than the 16.7% growth the company reported in Q1. “Other bets” revenues were $162 million, up 12% from a year ago.
Alphabet also announced that its board has authorized the repurchase of another $25 billion of its Class C common shares. The company ended the quarter with $121.1 billion in cash, cash equivalents and marketable securities.
“Our effort to build a more helpful Google for everyone brings countless opportunities to help users, partners, and enterprise customers every day,” Alphabet CEO Sundar Pichai said in a statement. “From improvements in core information products such as Search, Maps, and the Google Assistant, to new breakthroughs in AI and our growing Cloud and Hardware offerings, I’m incredibly excited by the momentum across Google’s businesses and the innovation that is fueling our growth.”
Added CFO Ruth Porat: “With revenues of $38.9 billion, up 19% versus the second quarter of 2018 and up 22% on a constant currency basis, we’re delivering strong growth. Our ongoing investments in compute capabilities and engineering talent reflect the compelling opportunities we see across the company.”
As per usual, the company did not break out the performance of YouTube, Google Cloud, or other segments of its Google business, nor did the company provide any forward guidance.
On a conference call with analysts and investors, though, Pichai did say that its Google Cloud business is operating at a run rate of over $8 billion.
Also on the call, Porat said that recent foreign exchange headwinds are likely to continue in the third quarter. She added that headcount additions in 2019 would be higher than originally forecast, due to additional hiring in the cloud business and once incorporating the impact of the company’s recent Looker acquisition. The company is also bringing in house some customer support functions that had previously been outsourced.
Porat said that capital spending growth in 2019 will moderate relative to 2018.
Asked on the call about the Department of Justice’s review of large technology platforms, Pichai said: “We understand there will be scrutiny, we will engage constructively, it isn’t new to us....For me, it is important that we stay focused on building helpful products for users.”
Alphabet stock is up 9% to $1238 in after-hours trading.
This story has been updated to reflect comments from the company’s conference call, as well as the latest after hours stock movement.
Write to Eric J. Savitz at eric.savitz@barrons.com
