After struggling for years to wring profit from the mobile boom, Google is benefiting from a surge in clicks on ads on smartphones.
Capitalizing on consumers’ shift toward handsets and away from laptops, Google crammed more ads into mobile search results, including new lucrative shopping spots, while running more promotions on its Maps app. The result: Parent Alphabet Inc. beat analysts’ sales projections in the first quarter, ending a four-year streak of missing Wall Street estimates after the holidays.
Revenue in the quarter, minus payouts to partners, rose to $20.12 billion, above forecasts of $19.76 billion. Net income was $7.73 a share, easily beating analysts’ forecasts, helped by cost controls at some of the company’s moonshot projects.
Alphabet shares closed at a record earlier on Thursday in New York.
Along with mobile ads, Alphabet executives cited the growth of YouTube ads as a key driver. Major marketers paused spending recently on the video site over concern about ads running beside offensive content, but that probably had little effect on first-quarter results because it began less than two weeks before the period ended. And the boycott didn’t include search ads, the bulk of Google’s business.
The YouTube ad issue won’t impact revenue going forward, according to an executive who spoke after the earnings report.
Another factor that investors may cheer came from continued cost controls at Alphabet’s most audacious projects. The company cut spending on its Other Bets units — the non-Google businesses that include its self-driving car company, Waymo. Expenditures on those divisions totaled $170 million during the quarter, down 39% from a year earlier. Alphabet spent more than 14 times that amount on Google.
Other Bets operating losses narrowed from the prior quarter, mainly from a pullback by the company’s Fiber broadband service. Last year, it dramatically cut back on the once-ambitious effort. On the earnings call, Chief Financial Officer Ruth Porat said some Fiber staff were reallocated to Google.
In a letter to shareholders before Alphabet’s earnings, CEO Larry Page highlighted the recent progress of the self-driving car business, saying he “can’t wait until Waymo launches.” Page also noted “significant investments” to expand Fiber and expressed excitement about “opportunities to do it better” — a nod to the efficiency drive at the broadband business.
— Bloomberg News