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Why Is Alphabet (GOOGL) Up 2.4% Since Last Earnings Report?
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A month has gone by since the last earnings report for Alphabet (GOOGL - Free Report) . Shares have added about 2.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Alphabet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Alphabet Earnings Beat Q2 Estimates
Alphabet’s second-quarter 2023 earnings of $1.44 per share beat the Zacks Consensus Estimate by 9.1%. The figure grew by 19% year over year.
Revenues of $74.6 billion increased 7% year over year (9% at constant currency).
Net revenues, excluding total traffic acquisition costs or TAC (the portion of revenues shared with Google’s partners and amounts paid to distribution partners and others who direct traffic to the Google website), was $62.07 billion, which surpassed the consensus mark of $60.24 billion. The figure rose 8% from the year-ago quarter’s level.
TAC of $12.54 billion was up 2.6% year over year.
Top-line growth was driven by the solid momentum in GOOGL’s cloud business and improvements in Search and YouTube’s performance. Strengthening the Other Bets segment was a positive.
However, Alphabet witnessed sluggishness in Google Network ads due to a slowdown in digital advertisement spending. This remained a major concern.
Alphabet’s growing investments in AI, strong efforts to boost its Search business and expanding cloud services portfolio, which is expected to yield huge returns in the days ahead, remain major positives. This, in turn, is expected to instill investor optimism in the stock in the days ahead.
Segments in Detail
Alphabet reports revenues under Google Services, Google Cloud and Other Bets.
Google Services:
Revenues from the Google Services business increased 5.5% year over year to $66.3 billion, accounting for 88.8% of the total revenues.
Under this business, search revenues from Google-owned sites increased 4.8% year over year to $42.6 billion, which surpassed the Zacks Consensus Estimate of $41.75 billion.
YouTube’s advertising revenues improved 4.4% year over year to $7.7 billion, while Network advertising revenues decreased 4.9% to $7.85 billion. While YouTube ad revenues came ahead of the Zacks Consensus Estimate of $7.4 billion, Network ad revenues were below the consensus mark of $7.86 billion.
Total Google advertising revenues were up 3.3% year over year to $58.14 billion and accounted for 77.9% of the total revenues. The figure beat the consensus mark of $56.97 billion.
Google’s Other revenues, consisting of Google Play and YouTube non-advertising revenues, were $8.14 billion for the second quarter, up 24.2% year over year. The figure came ahead of the consensus mark of $7.25 billion.
Google Cloud:
Google Cloud revenues rose 28% year over year to $8.03 billion, accounting for 10.8% of the quarter’s total revenues. The reported metric surpassed the Zacks Consensus Estimate of $7.72 billion.
Other Bets:
Other Bets’ revenues were $285 million, up 47.7% year over year and accounted for 0.4% of the total first-quarter revenues. The figure beat the consensus mark of $256 million.
Regional Details
EMEA (30% of total revenues): GOOGL generated $22.29 billion in revenues from the region, increasing 9% year over year.
APAC (17.1% of total revenues): The region generated $12.73 billion in revenues, up 9% from the year-ago quarter’s level.
Other Americas (6% of total revenues): The region generated $4.51 billion in revenues, up 4% on a year-over-year basis.
United States (47% of total revenues): Alphabet generated $35.07 billion in revenues from the region, which increased 7% from the prior-year quarter’s level.
Operating Details
Costs and operating expenses were $52.8 billion, up 5% year over year. As a percentage of revenues, the figure contracted 140 basis points (bps) from the year-ago quarter’s level.
The operating margin was 24.9%, which expanded 140 bps year over year. Segment-wise, Google Services’ operating margin of 35.4% expanded by 100 bps from the prior-year quarter’s level.
Google Cloud reported operating income of $395 million compared with a loss of $590 million in the year-ago quarter.
Other Bets reported a loss of $813 million compared with a loss of $1.34 billion in the prior-year quarter.
Balance Sheet
As of Jun 30, 2023, cash, cash equivalents and marketable securities were $118.3 billion, up from $115.1 billion as of Mar 31, 2023.
Long-term debt was $13.7 billion at the end of the reported quarter compared with $13.69 billion at the end of the previous quarter.
Alphabet generated $28.7 billion of cash from operations in second-quarter 2023 compared with $23.5 billion in first-quarter 2022.
GOOGL spent $6.9 billion on capex, netting a free cash flow of $21.8 billion in the reported quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 7.82% due to these changes.
VGM Scores
Currently, Alphabet has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Alphabet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Alphabet (GOOGL) Up 2.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Alphabet (GOOGL - Free Report) . Shares have added about 2.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Alphabet due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Alphabet Earnings Beat Q2 Estimates
Alphabet’s second-quarter 2023 earnings of $1.44 per share beat the Zacks Consensus Estimate by 9.1%. The figure grew by 19% year over year.
Revenues of $74.6 billion increased 7% year over year (9% at constant currency).
Net revenues, excluding total traffic acquisition costs or TAC (the portion of revenues shared with Google’s partners and amounts paid to distribution partners and others who direct traffic to the Google website), was $62.07 billion, which surpassed the consensus mark of $60.24 billion. The figure rose 8% from the year-ago quarter’s level.
TAC of $12.54 billion was up 2.6% year over year.
Top-line growth was driven by the solid momentum in GOOGL’s cloud business and improvements in Search and YouTube’s performance. Strengthening the Other Bets segment was a positive.
However, Alphabet witnessed sluggishness in Google Network ads due to a slowdown in digital advertisement spending. This remained a major concern.
Alphabet’s growing investments in AI, strong efforts to boost its Search business and expanding cloud services portfolio, which is expected to yield huge returns in the days ahead, remain major positives. This, in turn, is expected to instill investor optimism in the stock in the days ahead.
Segments in Detail
Alphabet reports revenues under Google Services, Google Cloud and Other Bets.
Google Services:
Revenues from the Google Services business increased 5.5% year over year to $66.3 billion, accounting for 88.8% of the total revenues.
Under this business, search revenues from Google-owned sites increased 4.8% year over year to $42.6 billion, which surpassed the Zacks Consensus Estimate of $41.75 billion.
YouTube’s advertising revenues improved 4.4% year over year to $7.7 billion, while Network advertising revenues decreased 4.9% to $7.85 billion. While YouTube ad revenues came ahead of the Zacks Consensus Estimate of $7.4 billion, Network ad revenues were below the consensus mark of $7.86 billion.
Total Google advertising revenues were up 3.3% year over year to $58.14 billion and accounted for 77.9% of the total revenues. The figure beat the consensus mark of $56.97 billion.
Google’s Other revenues, consisting of Google Play and YouTube non-advertising revenues, were $8.14 billion for the second quarter, up 24.2% year over year. The figure came ahead of the consensus mark of $7.25 billion.
Google Cloud:
Google Cloud revenues rose 28% year over year to $8.03 billion, accounting for 10.8% of the quarter’s total revenues. The reported metric surpassed the Zacks Consensus Estimate of $7.72 billion.
Other Bets:
Other Bets’ revenues were $285 million, up 47.7% year over year and accounted for 0.4% of the total first-quarter revenues. The figure beat the consensus mark of $256 million.
Regional Details
EMEA (30% of total revenues): GOOGL generated $22.29 billion in revenues from the region, increasing 9% year over year.
APAC (17.1% of total revenues): The region generated $12.73 billion in revenues, up 9% from the year-ago quarter’s level.
Other Americas (6% of total revenues): The region generated $4.51 billion in revenues, up 4% on a year-over-year basis.
United States (47% of total revenues): Alphabet generated $35.07 billion in revenues from the region, which increased 7% from the prior-year quarter’s level.
Operating Details
Costs and operating expenses were $52.8 billion, up 5% year over year. As a percentage of revenues, the figure contracted 140 basis points (bps) from the year-ago quarter’s level.
The operating margin was 24.9%, which expanded 140 bps year over year. Segment-wise, Google Services’ operating margin of 35.4% expanded by 100 bps from the prior-year quarter’s level.
Google Cloud reported operating income of $395 million compared with a loss of $590 million in the year-ago quarter.
Other Bets reported a loss of $813 million compared with a loss of $1.34 billion in the prior-year quarter.
Balance Sheet
As of Jun 30, 2023, cash, cash equivalents and marketable securities were $118.3 billion, up from $115.1 billion as of Mar 31, 2023.
Long-term debt was $13.7 billion at the end of the reported quarter compared with $13.69 billion at the end of the previous quarter.
Alphabet generated $28.7 billion of cash from operations in second-quarter 2023 compared with $23.5 billion in first-quarter 2022.
GOOGL spent $6.9 billion on capex, netting a free cash flow of $21.8 billion in the reported quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 7.82% due to these changes.
VGM Scores
Currently, Alphabet has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Alphabet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.