Google’s parent Alphabet Inc. (NASDAQ: GOOGL)reported its second quarter financial results and smashed analysts’ estimates in both revenue and earnings, sending shares 4.38% higher during Tuesday’s pre-market hours.
For the second quarter, Alphabet reported revenue of USD 32.65 Billion, increasing 24% year over year and beating analysts’ estimates of USD 32.07 Billion. The Company reported an adjusted EPS of USD 11.75, topping analysts’ estimates of USD 9.59.
The tech giant was hit with a USD 5.1 Billion fine from EU regulators saying that Google forced device makers to install its search engine and its Chrome browser onto Android devices. Including the fines, Google reported an EPS of USD 4.54.
Accounting for TAC or traffic acquisition costs, which totaled USD 6.42 Billion, Google reported revenue of USD 26.11 Billion, beating FactSet analysts’ estimates of USD 25.48 Billion.
Google’s properties revenue delivered USD 23.26 Billion, while its Network properties revenue reported USD 4.82 Billion, totaling to USD 28.08 Billion in ad revenues.
“Google Sites revenue has continued to grow, it’s the fourth quarter in a row of accelerating growth rates,” said JMP Securities analyst Ron Josey. “The Company’s continued ability to reinvent or launch new ad products that have been adopted by advertisers, and that drives return on investment.”
After Google was able to brush off the EU fine, Wall Street regained confidence in the tech giant.
GBH Insights analyst Daniel Ives wrote in a note to clients that the TAC costs were lower than expected, which is a “clear positive takeaway from the quarter.”
JP Morgan analyst Doug Anmuth reiterated its overweight rating for Alphabet shares, citing its optimism over the Company’s artificial intelligence technology. He raised his price target to USD 1,440 from USD 1,285, according to CNBC.
“Alphabet delivered strong top line results, again proving that its increased investments are paying off,” Anmuth said in a note to clients Tuesday. “Investments in machine learning & AI are driving innovation throughout Alphabet’s businesses, including mobile search, cloud, Google Home, Assistant, Waymo, etc.”
“We continue to believe there is meaningful runway across search and YouTube as ROI improves and TV dollars shift more online. Google Segment’s other businesses such as Cloud, Play, and Hardware have strong momentum,” Anmuth added.
KeyBanc Capital Markets analyst Andy Hargreaves reiterated his overweight rating for the stock, citing the Company’s investments will generate strong returns. He raised his price target to USD 1,430 from USD 1,230.
“We believe strong growth potential remains in opportunities with cloud, hardware, YouTube, Waymo, and Other Bets, which should add significant value over time.” said Hargreaves.
“Our investments are driving great experiences for users, strong results for advertisers, and new business opportunities for Google and Alphabet," said Ruth Porat, Chief Financial Officer of Alphabet and Google.