With online consumer activity remaining elevated in the
first quarter, Alphabet beat analysts' revenue estimates and nearly surpassed
the sales record it set in the fourth quarter.
Google ad sales jumped 32% in the first quarter compared
with a year ago, above expectations of analysts tracked by Refinitiv. Cloud
sales increased 45.7%, in line with estimates.
Alphabet shares rose about 4.3% to $2,390.10 in extended
trading.
The results provided the first sign that Google services
such as search and YouTube may hold on to gains made since lockdowns and other
pandemic restrictions forced people to shop and communicate online over the
last year.
About 17% of people in the United States, Alphabet's top
region by revenue, were fully vaccinated against COVID-19 by the end of the
first quarter. Activities including in-person dining resumed in big cities in
March, and security screenings at U.S. airports had their busiest day in a
year.
But Alphabet Chief Financial Officer Ruth Porat told
analysts on Tuesday, "it's too early to forecast the extent to which these
changes in consumer behavior and advertising spend will endure."
Google Chief Business Officer Philipp Schindler and Porat
declined to comment on whether Google had seen a recovery in spending by travel
and other industries that were major customers before the pandemic.
Alphabet's overall quarterly sales rose 34% to $55.3
billion, above analysts' estimate of 26% growth from a year ago and close to
the $56.9 billion it reported in the fourth quarter. Revenue benefited by an
unspecified amount from Google's acquisition of smartwatch maker Fitbit in
January.
Alphabet's quarterly profit was $17.9 billion, or $26.29 per
share, beating estimates of $15.88 per share and topping its previous-high of
$15.2 billion last quarter.
But nearly $4 billion of earnings came from unrealized gains
in venture capital investments and recalculating depreciation of some data
center equipment.
The high sales pushed operating margins up to 30% for the
first time since incorporating as Alphabet in 2015 even as its costs began to
pick up again for hiring, legal matters and building out new facilities.
Alphabet in 2020 suffered its slowest sales growth in 11 years but posted
record profit and boosted its cash hoard by $17 billion after slowing hiring
and construction.
The share repurchase authorization by Alphabet's board
follows a $25 billion buyback program announced in 2019. Jefferies analyst Brent
Thill estimated Alphabet now has $56 billion left to spend buying its shares.
Google's ad business, the global market leader as measured
in sales, accounted for 81% of Alphabet's first-quarter revenue.
Schindler said retail, technology and consumer product
companies were among big search advertisers in the quarter.
Google Cloud, a distant rival to the cloud businesses of
Amazon.com Inc and Microsoft Corp, narrowed its operating loss to 44% to $974
million in the first quarter. But Porat told analysts not to glean too much
from the drop because one-time factors, including the depreciation, were at
play.
Shares of Alphabet, 184th among companies in the S&P 500
index, have surged 80% in the last year. Shares of top rival Facebook Inc,
which had been up 62% during the last year entering Tuesday, rose 1.7% after
hours.
Though several concerns about Google's long-term prospects
have emerged in recent years, none have significantly affected sales.
Resolution likely remains years away in privacy and
antitrust lawsuits against Google that could result in changes to its ad
operations.
Discussions about changing U.S. and European laws to impose
new oversight on Google, Facebook and other companies, especially regarding
privacy and artificial intelligence, have lagged as legislators have been
distracted by the pandemic.
Still, issues continue to emerge. On Monday, streaming TV
technology company Roku Inc accused Google of engaging in anticompetitive
behavior to benefit its YouTube and hardware businesses. YouTube called them
"baseless claims." -Reuters
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