Google parent Alphabet returns to sales growth in Q3 2020 as advertising recovers from the pandemic

Google parent Alphabet returns to sales growth in Q3 2020 as advertising recovers from the pandemic

(Reuters) – Google’s parent alphabet resumed third-quarter revenue growth on Thursday, beating analysts’ estimates as companies originally hit by the coronavirus pandemic resumed advertising with the internet’s largest ad provider . Alphabet shares rose 8% after closing regular trading at $ 1,556.88, up 13% year over year.

Wall Street had expected a rebound from Alphabet as the company announced in July that advertiser spending declined following lockdowns in March. The Google competitors Snap and Microsoft also reported sales that exceeded expectations in the last few days. Alphabet’s third-quarter revenue growth reflected an increase in spending across all major ad businesses, including Search, YouTube, and Partner Properties.

Ruth Porat, CFO, said the company had seen improvements from advertisers from all regions and industries. However, she did not say whether the trends showed signs of slipping as Europe and other areas tackle a significant spike in coronavirus infections. “Although we are satisfied with our performance in the third quarter, there are obviously uncertainties in the external environment,” said Porat. She told financial analysts the company won’t slow down spending on its cloud computing unit and other areas even if another round of COVID-19 bans hits ad demand.

The Google search engine and YouTube video service are gateways to the Internet for billions of people and are becoming increasingly important as users transact and chat online to avoid the virus. Advertisers turned to Google’s ad system to keep customers informed of offers and adjust service offerings as the economy starts to chug again.

EMarketer’s lead analyst Nicole Perrin said YouTube’s year-over-year revenue growth was 32%, compared to about 6% in the second quarter, due to advertisers’ continued desire for video inventory, the return of branded spend, and a significant spike of political advertising spending ”amid the US presidential election.

Google’s cloud business was almost unchanged in the second quarter, as was the company’s sales of apps, hardware, and content subscriptions. Alphabet announced that it would make the cloud a separate reporting unit starting in the fourth quarter, effectively reducing the Google unit’s cloud sales and costs. For the past few months, Google has been trying to promote advertising by not charging merchants for ad space and granting grants to help other businesses buy ads. The effort followed the company’s first drop in sales (compared to the same period last year in the second quarter) since going public in 2004.

However, the dominance of Google services has also become an obligation for the company. The US government sued the company last week for operating a search monopoly and stifling competition. Other regulators in the US and elsewhere have ongoing investigations into similar allegations. The various cases could result in Google having to divest part of its advertising business in the coming years, although financial analysts doubt it will.

Google’s advertising business represented 80% of Alphabet’s revenue of $ 46.2 billion in the third quarter. Analysts had expected sales of 42.9 billion US dollars or a growth of 5.9 percent over the previous year. Alphabet’s earnings were $ 11.2 billion, or $ 16.40 per share, compared to the average estimate of $ 7.698 billion, or $ 11.18 per share, among analysts covered by Refinitiv.

Google competitors Facebook, and Twitter also released financial results on Thursday that were above expectations. This shows how well internet companies have done through the pandemic. Facebook shares rose 30% on Thursday this year, Amazon rose 71% and Twitter rose 51%.

Alphabet’s total costs and spend increased 12% year over year to $ 35 billion in the third quarter, compared to a 7% increase a quarter ago. Capital expenditures were down 20% to $ 5.4 billion, compared to a 12% decrease last quarter.

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