Google Q3 Post-Earnings: What You Need to Know

By Duncan Ferris

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Alphabet (NASDAQ: GOOGL), the parent company of Google beat its third quarter earnings expectations

The tech giant returned particularly strong revenue and profit as advertising and search revenues from the three-month period stood out.

The company’s shares were falling last week as news from Apple spelled trouble for ad-based companies. However, it seems to be going from strength to strength, with optimism that new trends from the pandemic will help the business’ continued growth.

The numbers

The company’s revenue for the period came in at $65.12bn, ahead of expected revenues of $63.12bn. This amounted to year-on-year growth of 41%. Meanwhile, earnings per share (EPS) was $27.99, similarly beating expectations for EPS of $23.39 for the three-month period.

The tech giant’s strong figures were driven in revenue improvements from its Google advertising and Google Search segments. The former saw revenue increase from $38.1bn to $53.13bn, while the latter saw revenue rise from $26.34bn to $37.93bn. Meanwhile, revenue from its cloud division climbed by 45% to $4.99bn. This is the section of the business which focuses on the Gmail, Docs, Drive, Calendar and Meet apps.

Alphabet and Google CEO, Sundar Pichai, said:

“Five years ago, I laid out our vision to become an AI-first company. This quarter’s results show how our investments there are enabling us to build more helpful products for people and our partners.

“Ongoing improvements to Search, and the new Pixel 6, are great examples. And as the digital transformation and shift to hybrid work continue, our Cloud services are helping organizations collaborate and stay secure”.

Looking ahead

The main headwind Google faces in its fourth quarter will be changes to advertising. Changes to Apple's iOS operating system have impacted the way in which advertisers can keep track of how their campaigns are doing. This has already impacted some tech companies, such as Snap, which downgraded its own fourth quarter expectations based on the news.

Concern over this issue has led to something of a sell-off for shares of ad-based tech businesses. However, Alphabet and Google appear to be less exposed to this issue than some of the competition due to their ability to rely on their own Android OS.

How much the issue affects Google remains to be seen. In the meantime, Alphabet remained positive about its future. Part of this optimism stems from societal trends put in place during the pandemic. During this period, people’s reliance on companies like Google for information, entertainment and shopping increased hugely. It’s clear that Alphabet does not think this will change anytime soon.

Google chief business officer, Philipp Schindler, said:

"The consumer shift to digital is real and will continue even as we start seeing people return to stores. The underlying takeaway is that people want more choice, they want more information, more flexibility, and we don't see this reversing."

Meanwhile, Alphabet and Google CFO, Ruth Porat, indicated that the company will continue to invest in growth. She said the company had added 6,000 employees in the third quarter and said further “robust” headcount growth was anticipated in the fourth quarter.

Is Google a good investment?

The most recent earnings from Alphabet underpin why the company is such an attractive investment right now. The company’s dominance in the search segment has long made it compelling, with Google having a 92.5% market share of the search engine market as of June 2021. However, it still managed to grow revenue from this segment significantly.

The company’s share price has grown considerably in recent months, having increased by over 68% across the year to date. Even so, Alphabet’s share price did decline after the release of its third-quarter earnings, illustrating the high expectations investors have for the company.

Furthermore, the company has registered exceptional share price growth over its history and investors continue to look to the company for strong and reliable returns. Even so, it must be noted that Google faces a multitude of risks, from increased regulation to its troubles in the mobile space.

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Topics:
Quarterly Earnings
Industries:
Consumer Discretionary

Author: Duncan Ferris

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Duncan Ferris does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Duncan Ferris has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.