Post Earnings Coverage as Advertising Sales Power Alphabet Earnings Results

LONDON, UK / ACCESSWIRE / August 1, 2016 / Active Wall St. announces its post-earnings coverage on Alphabet Inc. (NASDAQ: GOOGL) (NASDAQ: GOOG). The company announced its second quarter fiscal 2016 (Q2 FY16) results on July 28, 2016. The parent company of Google posted a 21.3% increase in revenue powered by robust advertising sales on mobile devices and video content. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

For the quarter ended on June 30, 2016, the search engine behemoth reported adjusted earnings of $8.42 per share as compared to earnings of $6.99 per share in the year-ago period, topping analysts’ expectation of $8.04 per share. Q2 FY16 net income rose to $4.88 billion, or $7 per share, from $3.93 billion, or $4.93 per share, in the year ago period. Alphabet’s consolidated revenue rose to 21% to $21.50 billion in Q2 FY16 from $17.73 billion in Q2 FY15, against analysts’ estimate of $20.76 billion.

CFO Ruth Porat said in a statement that the results, ”reflect the successful investments we’ve made over many years in rapidly expanding areas such as mobile and video.”

Strong Advert Growth

For Q2 FY16, Alphabet’s Google segment posted revenues of $21.32 billion as compared to $17.65 billion in Q2 FY15. Revenues at Google websites rose 24% to $15.4 billion in Q2 FY16, while Google Network revenues rose 3% to $3.74 billion. The company said that its advertising revenue increased 19% $19.1 billion from Q2 2015.

Google achieved a 29% rise in paid clicks in Q2 FY16, where advertisers pay the company only if a user clicks on the ad, while paid clicks on Google websites were up 37% on y-o-y basis and grew 9% sequentially. Traffic acquisition costs paid to Google Network members rose to 70% of Network revenues, or $2.62 billion in Q2 FY16, while payments to distribution partners equalled $1.35 billion, about 9% of websites revenues.

YouTube is seeing strong ad growth

During the conference call Google’s CEO, Sundar Pichai, said that advertisers’ interest in YouTube was improving, including interest for its premium video ad offering called Preferred.

“It’s tough for us to assess whether it’s coming from TV or if advertisers are investing more, but we see strong momentum,” Mr. Pichai further added that the company is also seeing strong growth in mobile video, “On mobile alone, [YouTube] reaches more 18-49-year-olds than any TV network. The growth is very strong, and being driven by mobile.”

Moon Shots

In August 2015, Google’s management restructured the company, where Alphabet was created as a holding company, while Core Google which generates most of the company’s cash becoming a subsidiary, a separate category was created called “other bets” which includes the moon shots projects and the investment arm Google Ventures.

Revenue at Alphabet’s Other Bets division, which consists of its broadband business; life sciences company, Verily; smart home company, Nest; self-driving cars; and X, the research capacity that works on “moon shot” ventures, grew 150% to $185m in Q2 FY16, while operating losses widened to $859m as compared to $75 million in revenue and operating loss of $574 million in Q2 FY15.

Share Repurchase & Guidance

During Q2 FY16, Alphabet repurchased 2.0 million shares of its Class C capital stock for a total amount of $1.4 billion; the company said it has now completed all authorized share buybacks under its current program.

Alphabet did not provide a forecast, however analysts’ estimate the company will generate earnings of $8.35 per share on revenues of $21.62 billion.

Stock Performance

Alphabet’s class C (GOOGL) shares were up 3.33% at $791.34 at the close of Friday’s session on volume of 5.06 million. The company’s stock has gained 19.08% in the past 12 months.

Alphabet’s class A (GOOG) shares surged 3.07%, finishing last Friday’s trading session at $768.79. The company’s stock has gained 21.53% in the past 12 months.

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