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Google Jumps After Beating On Revenue, Despite Warning Of “Significant Slowdown” In March Ad Revenue

Courtesy of ZeroHedge View original post here.

After a worse than expected earnings season so far (so far US EPS of -24% yoy has come in some 9% lower than consensus expectations among companies reporting so far), traders were especially curious to see what Google earnings would look like today for two reasons: Google, as Goldman cautioned over the weekend, was one of the big five tech names that had been spared much of the pain that hit the rest of the S&P500, opening up a giant and unsustainable gap from the rest of the market with the largest 5 "FAAMG" stocks in the S&P500 now accounting for 22% of market cap, even higher than during the dot com bubble…

… while at the same time anecdotal industry updates suggested that online ad revenues  – the lifeblood of Google – had collapsed, something that GOOGL stock clearly failed to reflect. Which is why today's Google Q1 earnings could be so critical: if indeed as bad as some had suggested, a Google crash would hammer the group that was clearly the market's leadership. And needless to say, the health of Google’s ad business will be a bellwether for other tech platforms. Facebook and Twitter report later this week. 

With that in mind, this is what Google reported moments ago:

  • Q1 EPS $9.87, missing estimates of $10.35, but higher than the $9.50 a year ago.
  • Q1 Net Revenue (ex TAC) of $33.71BN, beating estimates of $32.6BN
  • Q1 Operating Income of $7.98BN, missing the estimate %8.06BN, and up 19% Y/Y

Here is how Google did on some other performance metrics:

  • Q1 Google properties revenues $28.54 billion, beating the expected $27.91 billion and +11% y/y,
  • Q1 Google advertising revenue $33.76 billion, also beating the expected $33.56 billion, and +9.9% y/y,
  • Q1 Google Cloud revenue $2.78 billion, +6.2% q/q
  • Q1 Youtube Ads Rev. $4.04B, -14% Q/Q
  • Q1 Google other revenue $4.44 billion, beating estimates of $4.28 billion and -19% y/y,
  • Q1 Other Bets revenue $135 million, missing estimates of $194.4 million and -21% y/y,
  • Q1 capital expenditure $6.01 billion, +29% y/y
  • Q1 Operating margin 19% vs. 18% y/y

Commenting on the earnings, CFO Ruth Porat said that "our business, led by Search, YouTube, and Cloud, drove Alphabet revenues to $41.2 billion, up 13% versus last year, or 15% on a constant currency basis. And while "performance was strong during the first two months of the quarter, but then in March we experienced a significant slowdown in ad revenues. We are sharpening our focus on executing more efficiently, while continuing to invest in our long-term opportunities."

So a beat on the top line but miss on the bottom with several key indicators mixed. Certainly it was not as bad as some had expected, and explains why initially kneejerking lower, the stock is now higher.

Of course, one word out of place during the conference call can sink all the gains, especially as analysts will certainly want to know just how bad the March "significant slowdown" was and how long it will persist. But for now, it appears that FAAMG may have escaped the momentum crash that Goldman warned about.


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