The parent company of Google, Alphabet, announced that its quarterly earnings more than doubled as search ads soared with more users turning to the internet amid the coronavirus pandemic. The company's first-quarter profit soared to $17.9 billion from $6.8 billion a year before, while sales increased by 34 percent to $55.3 billion, thanks to increases in ads and cloud computing services.
Google Ad Surge Drives Up Alphabet's Record Profit
"People have turned to Google Search and many online resources to stay updated, linked, and entertained over the last year," said Sundar Pichai, chief executive of Alphabet and Google. The growth in Alphabet's profits comes as regulators are scrutinizing the tech giant's dominance.
"Google essentially makes money; it's almost all ads," said Enderle Group analyst Rob Enderle. Because of "their broad effect on the political process and almost total domination of ad sales." According to the analyst, Facebook and Google are on the "short list" when it comes to regulatory oversight in Europe and the United States.
Google is one of the internet giants under pressure from regulators and analysts concerned that it abuses its ability to dominate business and stifle innovation, AFP via MSN reported. The Silicon Valley giant posted strong growth in search ads, or messages associated with the world's most popular internet search engine, as well as for its YouTube video-sharing site.
"Since the pandemic started, people have taken to Google search more than ever," Pichai said on an earnings call, adding that requests ranged from COVID-19 questions to career searches. According to Google's chief business officer Philipp Schindler, while the pandemic has posed significant obstacles for small companies, it has also provided openings for entrepreneurs to adapt their products to emerging trends.
Google owner sees record profits as the pandemic continues
Alphabet had "lapped up the rewards from the pandemic like a big cat pouncing on cream," according to Sophie Lund-Yates, an equity analyst at Hargreaves Lansdown. "While known for its start-up culture and workplaces, this tech giant is primarily an ad company," she explained.
"Because massive amounts of money have moved to online shopping as a result of COVID-19, revenue at Alphabet's impenetrable family of digital advertising companies has skyrocketed." The only issue that the tech giant faces is ongoing regulatory action on topics like competition and privacy, BBC reported.
On Monday, Roku, a digital TV technology firm, accused Google of engaging in anti-competitive conduct to promote its YouTube and hardware firms. Meanwhile, policymakers in the United States and Europe intend to consider tightening the regulation of Google and other tech giants, although no law has been agreed upon. Alphabet's stock gained 4.5 percent in after-hours trading as a result of the positive showing.
Google parent company, Alphabet, plans $50 billion buy-back
Alphabet reported a record profit for the second quarter in-a-row and a $50 billion share buy-back on Tuesday but cautioned that a boom in use and ad sales during the COVID-19 pandemic might slow as people resume in-person activities. With online user engagement staying high in the first quarter, Alphabet surpassed analysts' expectations and almost exceeded its fourth-quarter sales record.
In extended trade, Alphabet shares gained 4.3 percent to $2,390.10. The findings are the first indication that Google services like search and YouTube may maintain gains made over the last year as people were forced to shop and connect online due to lockdowns and other pandemic restrictions. By the end of the first quarter, roughly 17 percent of citizens in the United States, Alphabet's highest revenue-generating area, had been completely vaccinated against COVID-19.
In March, activities such as in-person dining returned to major cities, and security screenings at U.S. airports saw their busiest day in a year, as per VCCircle. "It's too early to predict the degree to which these shifts in consumer behavior and advertising spend will last," Alphabet Chief Financial Officer Ruth Porat told analysts on Tuesday.