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Earnings Results: Google’s wave of digital ad sales helps it crush revenue, earnings estimates

Google parent Alphabet Inc.’s stock jumped more than 3% in extended trading Tuesday after it reported advertising sales that shot its revenue and earnings well past analysts’ estimates.

The search-engine giant

turbocharged by digital advertising, reported net income of $18.53 billion, or $27.26 a share, in its fiscal second quarter, compared with net income of $6.96 billion, or $10.13 a share, in the same quarter last year.

Revenue after removing traffic-acquisition costs ($10.93 billion) jumped to $50.95 billion from $31.6 billion in the year-ago period. Overall revenue soared 62% to $61.9 billion. It is the first time Alphabet has cracked $60 billion in quarterly sales.

Analysts surveyed by FactSet had estimated net income of $19.24 a share, on ex-TAC revenue of $56.2 billion.

Of special note, Alphabet’s operating margin improved to 31% in the quarter, vs. 17% in the same quarter a year ago.

“Our strong second-quarter revenues of $61.9 billion reflect elevated consumer online activity and broad-based strength in advertiser spend,” Alphabet Chief Financial Officer Ruth Porat said in a statement announcing the results.

Alphabet Chief Executive Sundar Pichai put it simply during an earnings call with analysts late Tuesday: Google is benefitting from a “rising tide” of consumer and enterprise demand, he said.

Google advertising, in total, was $50.44 billion, up 69% from $29.9 billion in the year-ago quarter.

As is customary every quarter, search led the way with $35.85 billion in sales, compared with $21.3 billion in the same quarter a year ago. YouTube ad sales surged 84% year-over-year to $7 billion.

“During the pandemic, we’ve seen more consumers use YouTube to discover and shop,” Google Chief Business Officer Philipp Schindler said during the analyst call.

Google’s Cloud revenue climbed 54% to $4.63 billion, though the division trails rivals Inc. 

 and Microsoft Corp. 

in revenue.

The results “outperformed our expectations across all three lines of Google’s ad business: search, Google Network and YouTube,” eMarketer analyst Nicole Perrin said. “YouTube was the fastest-growing segment during the quarter and points to the continued strength of video advertising for both direct response and brand goals.”

What is more, the breakout results belie a flurry of antitrust lawsuits from federal regulators and state attorneys general into the business practices of Google, namely its search business, as well as recent appointments to head the Federal Trade Commission and Justice Department’s antitrust division.

Alphabet shares are up 50% so far this year, while the broader S&P 500 index 

is up 17% in 2021.

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