Alphabet’s financial report from the first quarter of 2021 – the fastest growth in advertising revenue in the last four years
“Over the past year, people have turned to Google Search and many of [Google’s] online services to be informed, stay informed, and also be entertained,” Pichai, CEO of Alphabet and Google, said of the company’s recent quarter performance. We continue to focus on providing reliable services to help people around the world. Our cloud services currently help small and large businesses to accelerate their digital transformation.”
According to Ruth Porat, Chief Executive Alphabet’s revenue totaled $55.3 billion in the first quarter, reflecting increased online user activity and massive growth in advertising revenue. Expressing satisfaction with the continued momentum in Google Cloud, Ruth Porat considers the $4 billion revenue in this segment during the most recent quarter to be a sign of the strength of this business as well as the existence of opportunities in both Google Cloud and Workspace platforms.
Alphabet’s operating profit in the first quarter of 2021 (with a profit margin of 30%) was equal to 16.4 billion dollars, and the company’s net profit was also announced as 17.9 billion dollars. For comparison, Alphabet’s revenue and net profit in the fourth quarter of last year were reported at $56.9 billion and $15.2 billion, respectively. It should be noted that Alphabet’s revenue in the last quarter was about 3.6 billion higher than what Wall Street analysts had estimated.
Next, we have a look at the performance of different sections of Alphabet in the first quarter of 2021:
As always, advertising has been the main source of income for Alphabet. According to a recent report, the income from advertising Google in the first quarter amounted to 44.68 billion dollars. Comparing this figure with the 33.67 billion revenue of the advertising sector in the same quarter of last year, it shows a significant growth and it is considered to be the fastest annual growth rate in this sector at least in the last four years.
The revenue obtained from YouTube ads (which is a small part of Google’s total ads) reached 6.01 billion dollars with a growth of 49% compared to the same period last year. Among the social media sites, YouTube can be called the main winner of the Corona era. A report published by the Pew Research Center shows that the use of this video platform by American adult users has increased from 73% in 2019 to 81% in 2021. Also, according to Sundar Pichai, daily views of YouTube Shorts – a serious competitor to TikTok – have increased from 3.5 billion views at the end of January to 6.5 billion views.
Income from the sale of hardware products (including Pixel phones and smart speakers), Play Store and YouTube’s non-advertising revenues are announced in Alphabet’s financial report under the title of Google other. In a recent report, the figure of Google other income equal to 6.5 billion dollars has been announced, which has increased compared to the 4.4 billion dollar income of this sector in the first quarter of 2020.
The revenue of Google cloud services – known as Google Cloud – in the first quarter of 2021, with an annual growth of 46% and in accordance with the estimates of Wall Street analysts, reached the figure of 4.05 billion dollars. Of course, this income not only did not bring profit for Alphabet, but also caused a loss of 974 million dollars to the company, which, of course, compared to the loss of the same period last year (1.73 billion dollars), the loss of cloud services is less. Not to mention, Google Clouds includes: infrastructure and data analysis platforms, collaboration tools like Google Docs and Google Sheets, and other services for office and enterprise customers.
The income of some of Alphabet’s divisions – including the health technology unit called Verily and the self-driving car company Waymo – is presented in the company’s financial report under the heading of Other Bets (other risks). In the latest report, Other Bets revenue was reported as $198 million, but as in previous quarters, the Other Bets business was loss-making, causing a loss of $1.15 billion to Alphabet.
During the most recent quarter, Alphabet also earned another $4.84 billion from the added value of some of its investments. Alphabet declined to name the profitable investments, but it is likely that UiPath, Stripe and Oscar Health are among these investments. As mentioned in the introduction, the members of Alphabet’s board of directors agreed to buy back shares for 50 billion dollars on April 23.
It was in March of this year that Google
announced its decision to invest 7 billion dollars to expand its offices and data centers in 19 US states; A plan in which at least 10,000 full-time jobs will be created. At the same time as announcing this news, we learned that Google has accepted the risk of reopening and has called its workforce – albeit with limited capacity – to work. Ruth Porat emphasized Google’s commitment to building and renovating its offices:
“Even with the hybrid workplace, we still need space, so we continue to build our campuses and office facilities.” Alphabet’s construction costs are expected to rise faster in 2021, he said, as the company plans to prepare its campuses for a hybrid workplace.