After a disappointing quarter to start the year with, Alphabet (Nasdaq: GOOG) appears to have got its groove back. The company’s recently reported results helped push the stock to a record high. And with its continued investment in the Cloud and Video, Alphabet’s growth won’t end soon.
Alphabet’s second quarter revenues grew 21% over the year to $21.5 billion, ahead of the Street’s forecast of $20.8 billion. On a constant currency basis, revenues grew 25% over the year. EPS of $8.42 was also ahead of the market’s projections of $8.04 per share.
By segment, revenues from Google’s business grew 21% to $21.3 billion. Within the segment, Google’s advertising revenues grew 19% to $19.14 billion with Google website revenues growing 24% to $15.4 billion and Google Network Member’s revenues growing 3% to $3.7 billion. Google other revenues grew 33% to $2.17 billion. Google does not break out its revenues from cloud services, but the management acknowledged that the growth in cloud services and Google Apps helped drive other revenues by 33% for the quarter. Revenues from other bets nearly tripled to $185 million.
Among operating metrics, aggregate paid clicks grew 29% over the year and 7% sequentially. Paid clicks on Google websites grew 37% over the year and paid clicks on member’s websites were flat over the year. Aggregate cost per click fell 7%, which included a 9% drop on Google’s own sites and an 8% drop on member’s websites.
During the quarter, Alphabet repurchased 2 million shares of Alphabet Class C capital stock for $1.4 billion.
Alphabet Intensifies YouTube Monetization
Over the past few quarters, Alphabet has increased its focus on monetizing YouTube. Earlier this year, it launched YouTube Red, the ad free video streaming option. It also became the first major platform to support live streaming in 360 degree format. Earlier in the quarter, it partnered with BT in the UK to livestream the Champions League and Europa League finals on YouTube in the UK. This was UK’s biggest-ever livestream.
Now, Alphabet is working to launch YouTube Unplugged, a service that would offer customers access to a bundle of cable TV channels streamed over the Internet. Alphabet does not disclose the revenues that YouTube makes, but analysts estimate that the service generated nearly $12.6 billion in revenues in 2015.
Alphabet Growth Focus
Alphabet is focusing its growth in six key areas. The first focus area is Information, which begins with Search. The company continues to invest in Search and recently introduced a voter tool for its US users so that when the user searches for register to vote, Alphabet will provide them with a detailed state-by-state guide with information on how to register, requirements, and deadlines. To simplify search for mobile users, it introduced a new keyboard for iOS called Gboard. Gboard allows users to search right from the keyboard, swipe to type, and quickly send emojis.
Its second focus area is Machine Learning. It has deployed a ranking signal called RankBrain in search which helps improve search results through deep learning. The capability has been deployed in 40 languages and Google claims that RankBrain can now accurately guess which results users will favor with about 80% accuracy. Besides helping consumers, Alphabet is also helping manage its financials better through machine learning. Last month, it announced a test that applied DeepMind’s machine learning to its data centers and helped it improve energy efficiency by 40%.
Content is the third focus area where it has expanded its mobile content through the launch of Accelerated Mobile Pages (AMP). Last month, it announced AMP for Ads, that help advertisers build fast and efficient ads and landing pages.
The fourth area of focus includes Platforms where it recently released a new virtual reality platform called Daydream. Daydream allows users to have experiences regardless of the device or stream they are using. Given the rising importance of virtual reality, it is also working with Android partners to build out the Daydream ecosystem which will include more Daydream-ready phones, controllers, and headsets starting this fall.
Fifth area includes the cloud platform and data analytics product called BigQuery. During the quarter, Alphabet introduced Tensor Processing Units, or TPUs, to deliver an order of magnitude better optimized performance per watt for machine learning projects. It also launched two cloud machine learning APIs for speech and natural language to help the enterprise customers translate audio to text.
Finally, Google is also working on ensuring that it provides services for everyone, and not just the developed economies. For instance, it has partnered with Indian Railways and RailTel to bring high-speed wireless access to the Internet to the Indian population who travel throughout India’s big railway stations. The service already sees more than 2 million people logging in every month.
Alphabet’s stock is currently trading at $772.28 with a market capitalization of $530.6 billion. It touched a record high of $820 last week in the after-hours trading session post the result announcement. It had fallen to $565.05 in August last year.
Photo credit: Francis Vallance (Heritage Warrior)/Flickr.com.