Google (Alphabet) earnings report delivered good news on many levels. Google continues to show incredible strength with all three core segments showing growth.
Core Google search is seeing 44% operating margins, while Google Cloud is now an $18B annual business growing at 53% year over year.
At a $28B run rate, YouTube grew 83% year over year and I believe that it remains in the early days of monetization as per our conversations with large $1B+ ad agencies. Waymo and Verily are around and not even in our thinking, but have moonshot potential.
Here are some growth and margins highlights from Alphabet’s earnings release:
Growth:
– $61B in sales, +61.6% year over year
– This is the strongest revenue growth in a decade.
– Google Cloud is growing rapidly.
– YouTube is still under-monetized with significant runway.
– YouTube + Google Cloud is a $46B annual run-rate business. This is 2 times the size of Visa.
Margins:
– 31% operating margins – very strong!
– Core Google ex other bets is 44% margins – wow!
– Now showing 4 straight quarters of accelerating operating margins.
– $21B in operating cash flow.
Alphabet – A Longer Term View
Google has multiple layers of growth and little of this is priced into the asset as of yet. The company remains well-positioned within many of our Structural Growth Innovation Blocks. This includes the Future of Mobility, the Future of Computing, Digital Work, and Interactive Entertainment.
Twitter: @_SeanDavid
The author or his firm may have positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
