Alphabet Inc. (GOOG, Financial) reported first-quarter earnings after the market closed on April 27. Wall Street analysts expected a strong showing from Google parent in the first quarter, but few realized just how good 2021 has been to the tech giant thus far. As it turned out, the company delivered big beats on both top and bottom lines, thanks in no small part to a standout performance by its YouTube video platform.
Earnings by the numbers
Let's start with a walkthrough of Alphabet's financial performance in the first quarter. The company posted revenue to the tune of $55.31 billion, up 34% from the $33.76 billion it brought in during the first quarter of 2020. It was also 7% more than the $51.7 billion in revenue that analysts had predicted.
While Alphabet's 7% top line beat was impressive enough, its bottom line performance blew away all expectations. The company reported $17.93 billion in net income, or $26.29 on a per-share basis, which was more than 160% higher than in the same period last year.
Of course, the first quarter of 2020 was a tough one for Alphabet, just as it was for virtually every company on the planet thanks to the Covid-19 pandemic, which makes the year-over-year comparison less useful. Still, the blowout earnings print was undeniably impressive, exceeding analysts' consensus estimate of $15.82 by 66%.
YouTube shines bright
While Alphabet enjoyed a strong showing from virtually all of its business units, the performance of YouTube made it the standout start of the first quarter report. The video streaming service raked in an impressive $6.01 billion from ad sales, more than 5% more than analysts had expected. While not as big as Alphabet's overall revenue beat, it was still a strong showing, representing a 49% increase from the same period last year.
YouTube has enjoyed strong tailwinds since the outbreak of the pandemic. According to an April 7 report by Pew Research, YouTube has seen significant user growth over the past year, rising from 73% of adults in the United States in 2019 to 81% this year. Shorts, YouTube's short-form video service designed to emulate the popular TikTok, has also enjoyed substantial growth despite limited market penetration to date.
My take
Alphabet's latest strong performance is indicative of the company's enduring strength. While Google remains Alphabet's dominant profit center, the growing strength of other services like YouTube point toward a bright future for the tech titan.
With a $1.6 trillion market capitalization and a price-earnings ratio approaching 37, Alphabet can hardly be called cheap. But it is also hard to call the company anything other than a powerhouse of today's digital economy. There may be cheaper entry points down the line, but I do not anticipate momentum shifting against this particular name anytime soon.
Disclosure: No positions.
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