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.