Google, er, Alphabet takes on 10,000 more staff, banks more and more billions from ads

Still totally reliant on advertising

Alphabet, the holding company for Google and the Chocolate Factory's other concerns, has reported strong growth in the second quarter ending June 30, with revenues up 21 per cent from this time last year.

Google made up the vast majority of this revenue, accounting for $21.3bn for the quarter, with the other parts of Alphabet contributing just $185m. The company added 2,460 staff in the quarter, primarily engineers and product managers, Alphabet CFO Ruth Porat said in the earnings call, bringing total headcount to 66,575.

"Our terrific second quarter results reflect the successful investments we've made over many years in rapidly expanding areas such as mobile and video. We continue to invest responsibly in support of our many compelling opportunities," said Porat.

A full rundown of the figures is below. All figures are GAAP unless otherwise stated.

  • Total revenues: In the quarter, total revenues for the group were $21.5bn, up from $17.7bn this time last year. That's a rise of 21 per cent, although that would have been 25 per cent but for currency issues.
  • Net income: Profits rose 24 per cent to $4.8bn for the quarter.
  • Earnings per share: Alphabet's Class A, B and C stock report EPS of $7, up from $4.93 for A&B and $6.43 for C in the second quarter of 2015.
  • Taxes and share support: Google paid an effective tax rate of 20 per cent for the quarter, which is high for a tech firm – Microsoft paid just 7 per cent. Google spent $1.6bn buying its own shares in the quarter.
  • Capital expenditure: Alphabet's capex actually fell over the quarter compared to this time last year to $2.1bn. Porat said that a large part of this was expenditures involved in building out the Google Fiber network.
  • Google: Revenues for Google websites rose 21 per cent on the year to $21.3bn, with advertising revenues growing 19 per cent to $19.1bn over the same period. Other revenues rose 33 per cent to 2.2bn for the quarter.

    Paid clicks rose just 7 per cent in the quarter, compared to a rise of 29 per cent last year. The aggregate cost per click dropped 1 per cent, compared to a drop of 7 per cent in the second quarter of 2015.

  • Android: CEO Sundar Pichai reported that Android growth is still strong and steady. In the second quarter, 65 billion Android apps were installed and voice searches now account for 20 per cent of information requests to Google.

    "The strength of the figures is in mobile," he said. "Our investment in mobile underscores everything we do. We are building the engine that drives our future."

  • Other Bets: Alphabet's other ventures are grouped together and delivered relatively puny revenues – around $185m. That's up on this time last year, when they contributed just $74m. The group made a loss of $709m, up from a loss of $555m last year.

    Porat said that analysts shouldn't take too much from the quarterly results for Other Bets, since they are long-term plays by the company and are affected by short-term large costs, like partnership agreements.

  • Self-driving cars: Alphabet is going to be doubling the size of its automated car fleet and the cars are now on the road in four US cities. Porat said the company's strategy was different from the rest of the market – Google wanted fully autonomous cars because they found partial autonomy led to drivers not paying attention to the road.

"I think the results are mixed," said Global Equities Research analyst Trip Chowdhry, who felt sales were lighter than expected. "From a cost control [perspective], it seems they will do fine. The question becomes: can they continue to grow their revenues? I think that is a question mark."

Overall, Wall Street was pretty happy to the figures: Alphabet shares rose more than four per cent in after-hours trading past $798 apiece. ®

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