With consumers spending more time online during the pandemic, retailers have been pushing to get there.
Quarterly revenue and profits for Alphabet Inc, Google’s parent company, hit record highs, the company reported Tuesday, driven by an increase in ad spending as more consumers shopped online.
Shares of Alphabet, the world’s largest provider of search and video ads, rose 3.3 percent in extended trading after the results, which easily beat analyst estimates. Shares of Facebook, which competes with Google in web ad sales and reports its own results on Wednesday, rose 1.3 percent.
Overall, it was a stellar day for big US tech companies: Apple and Microsoft also reported record profits.
With consumers spending more time online during the coronavirus pandemic, retailers have been pushing to get there, whether they’re shopping for products using Google search or watching YouTube videos. The nascent US economic rebound that has accompanied the launch of the vaccine and the easing of restrictions is also helping, as consumers enjoy greater mobility and shopping options of all kinds.
Alphabet CEO Sundar Pichai has pointed to e-commerce as a major growth area for the internet giant. He deepened his company’s relationship with Shopify, to sharpen his business efforts while continuing to go after Amazon. The subsidiary YouTube has also joined. The world’s largest video platform bought an Indian company, Simsim, earlier this month to deepen the video trade.
“Alphabet has benefited from the overall return on ad spend in the marketplace and especially the balance of that return, which is more focused on digital channels than pre-pandemic,” said Tom Johnson, chief digital officer for WPP Mindshare.
Alphabet said Google’s advertising revenue increased nearly 70 percent to $ 50.44 billion during the second quarter ending June 30.
Retail brands were the biggest contributor to the growth of the advertising business, Philipp Schindler, Google’s chief commercial officer, said during a call with analysts. The travel, financial services and media and entertainment sectors were also strong, he added.
Ad revenue for the company’s video streaming platform YouTube was up 83.7 percent from the prior-year quarter to $ 7 billion, almost as much as Netflix generated in quarterly revenue.
The results “exceeded our expectations in all three lines of Google’s advertising business: search, Google network and YouTube,” said Nicole Perrin, principal analyst for eMarketer at Insider Intelligence. “YouTube was the fastest growing segment during the quarter and points to the continued strength of video advertising for both direct response and brand objectives.”
Alphabet’s total revenue increased 61.6 percent to $ 61.88 billion, well above Wall Street’s estimates of $ 56.16 billion, according to IBES data from Refinitiv.
Quarterly profit was $ 18.5 billion or $ 27.26 per share, beating expectations of $ 19.34 per share.
Google Cloud, which follows Amazon and Microsoft in market share, cut its operating loss to $ 591 million during the quarter.
The strong results coincide with Alphabet facing four antitrust lawsuits filed by regulators or US federal states, threatening to force significant changes to its business, including advertising and smart home devices.
More recently, 37 US state and district attorneys general alleged earlier this month that Google “illegally” maintained a monopoly on its app store on Android phones. The lawsuits are expected to take years to resolve.