(Bloomberg) — Google parent Alphabet Inc. reported quarterly sales that topped Wall Street estimates, powered by an increase in digital ad spending by businesses looking to expand during the pandemic reopening. The company also unveiled a big new share buyback, sending the stock up almost 5% in extended trading.
First-quarter revenue, excluding payments to distribution partners, came in at $45.6 billion. Analysts expected $42.6 billion on average, according to data compiled by Bloomberg.
Covid-19 restrictions have limited travel and trips to physical stores, two key areas of Google’s search business. However, Alphabet shares are up about 30% this year on optimism vaccinations in the U.S. will revive these activities. The company is also pushing further into e-commerce, but still lags behind rival Amazon.com Inc.
While most major tech companies thrived during the pandemic, Alphabet’s performance was uneven. YouTube ad revenue boomed as people were stuck at home looking to relieve boredom by watching videos online. Google’s cloud-computing business also grew quickly on a spike in demand for internet-based services from remote workers. However, the online search engine dwarfs these other operations and it suffered from a slump in commercial queries.
Now, with more than 1 billion Covid-19 vaccine shots given, according to Bloomberg’s vaccine tracker, consumers have started to venture out to restaurants, shops and even vacation destinations — and they often interact with Google services and ads before they do.
Ruth Porat, chief financial officer, said the results “reflect elevated consumer activity online and broad based growth in advertiser revenue.”
The Alphabet board authorized the company to repurchase up to an additional $50 billion of its Class C capital stock.
Chief Executive Officer Sundar Pichai is trying to expand beyond the advertising engine that generates most of Alphabet’s revenue, while contending with a regulatory backlash that includes three government antitrust suits targeting different parts of its business in the U.S. He’s also preparing to bring employees back to the office in September.
Search and other related businesses generated sales of $31.9 billion in the first quarter. Wall Street estimated $29.9 billion.
YouTube ad revenue surged 49% to $6 billion. Analysts were looking for $5.7 billion.
The company’s cloud division, led by Thomas Kurian, is wooing corporations and other large customers in a bid to catch market leaders Amazon.com Inc. and Microsoft Corp. Google Cloud revenue jumped to $4 billion, in line with Wall Street expectations.
Alphabet’s Other Bets, such as autonomous vehicles and delivery drones, generated revenue of $198 million. That division lost $1.15 billion.
Alphabet overall generated $17.9 billion of net income, or $26.29 a share, in the most recent quarter, compared with $6.8 billion, or $9.87 a share, a year earlier.
(Updates with additional financial results starting in 12th paragraph.)
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