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Recovering From Earlier Slump, Alphabet Posts Strong Q2 Earnings

Investors in Google’s parent company Alphabet can stop holding their breath: The company posted stronger-than-expected Q2 2019 earnings Thursday, revealing a net income of nearly $10 billion for the quarter. Alphabet’s shares were up more than 9% in after-hours trading.

In Q2, Alphabet generated revenue of $38.94 billion, compared to $32.66 billion during the same quarter last year. The company’s net income for the quarter was $9.95 billion. Last year around, the company only booked a net income of $3.2 billion due to hefty fines it had to pay to the European Union. Without those fines, net income for Q2 of 2018 would have been $8.23 billion.

This past quarter’s net income translates to diluted earnings per share of $14.21. Analysts had expected earnings per share of $11.30 on revenue of $38.16 billion. This comes after Alphabet posted a notable earnings miss in Q1, when earnings per share were about a dollar below market expectations.

Last quarter, Google executives called out “year-on-year headwinds” facing the entire smart phone industry, with consumers shying away from purchasing expensive high-end phones. Fast forward 3 months, and Google does have an answer of sorts: The company released its budget-priced Pixel 3a phones, which start at $399, in May.

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Those efforts seemed to be paying off, if Thursday’s numbers are any indication. Google CEO Sundar Pichai called out the Pixel 3a during the company’s earnings call Thursday afternoon, and said that Pixel sales grew 2x year-over-year.

Google’s non-advertising revenue was up by close to 40%, to the tune of $6.18 billion for the quarter. In addition to hardware revenues and subscription services, “other revenues” also includes the company’s cloud computing business. Executives said Thursday that the company’s cloud business was operating at an $8 billion annual run rate.

Google executives also once again highlighted YouTube as a major revenue contributor, with Alphabet and Google CFO Ruth Porat saying that the video service was the second-largest revenue growth contributor during the quarter. She also said that the company’s increased take-downs of harmful content had only negligible impact on Google’s revenue.

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