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Alphabet Inc Class C GOOG

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Alphabet’s Q1 Numbers Beat All Expectations; Cloud Continues To Fly Higher; Raising FVE to $2,925

Ali Mogharabi Senior Equity Analyst

Analyst Note

| Ali Mogharabi |

Alphabet reported strong first quarter results with top and bottom line coming in easily ahead of the FactSet consensus estimates. Continuing strength in ad revenue due to the economic recovery, which drives more brand ad spending, and higher direct-response ad spending drove growth higher. The strong ad business was combined with the firm’s successful revenue diversification as the cloud segment is benefiting from digital transformation and wider adoption of cloud by businesses of all sizes. While we expect some deceleration in direct-response ad revenue in the second half of this year, we remain confident that acceleration in brand ad spending, which increases YouTube monetization, and continuing strength in cloud will offset this headwind. In addition, with increasing outdoor activities and travel by consumers, monetization of Google Maps could further strengthen the firm’s revenue growth.

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Company Profile

Business Description

Alphabet is a holding company, with Google, the Internet media giant, as a wholly owned subsidiary. Google generates 99% of Alphabet revenue, of which more than 85% is from online ads. Google’s other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, the Pixel smartphone, and smart homes products, which include Nest and Google Home, also contribute to other revenue. Alphabet’s moonshot investments are in its other bets segment, where it bets on technology to enhance health (Verily), faster Internet access to homes (Google Fiber), self-driving cars (Waymo), and more. Alphabet’s operating margin has been 25%-30%, with Google at 30% and other bets operating at a loss.

Contact
1600 Amphitheatre Parkway
Mountain View, CA, 94043
T +1 650 253-0000
Sector Communication Services
Industry Internet Content & Information
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type Aggressive Growth
Employees 139,995

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