Alphabet Inc. (GOOGL, Financial)(GOOG, Financial), the holding company of Google, said second-quarter revenues increased 21% year over year and 23% year over year on a constant currency basis.
Brief summary of earnings report and webcast
The Mountain View, California-based company reported consolidated revenues of $26.01 billion, with Google advertising revenues of $22.67 billion and total Google revenues of $25.76 billion. Net income declined to $3.52 billion as Alphabet accrued a $2.7 billion antitrust fine from the European Commission during the quarter.
Chief financial officer Ruth Porat praised Alphabet’s employees for “delivering strong growth with great underlying momentum” during the quarter while “continuing to make focused investments in new revenue streams.” Google reported a 15% increase in paid clicks on its properties during the second quarter, driven by continued momentum in YouTube and Google’s mobile search platform.
In the earnings call, Porat and CEO Sundar Pichai both mentioned the company increased investments in areas with high potential, including non-advertisement segments Google Play, Home, Cloud and Wi-Fi. Pichai reported YouTube’s customer base increased to 1.5 billion and the average customer spends approximately one hour watching YouTube videos per day.
Alphabet’s earnings contributed to profit margins that outperform over 87% of global online media companies. The company’s financial strength and profitability both rank a solid 8 out of 10, suggesting good growth potential in the short term.
Class A shares nearly reach four-digit share price
Alphabet’s Class A shares (GOOGL, Financial) climbed 0.45% to $998.31 as the company reported strong revenue momentum for the quarter. The company’s Class C shares (GOOG, Financial), which trade approximately $18 cheaper, climbed 0.76%. While the stock is not significantly overvalued, GOOGL’s share price is still approximately $150 more than its 10-year median price-sales valuation. GOOG, on the other hand, trades near its five-year maximum price-sales valuation.
Disclosure: The author has no positions in Alphabet.
