Alphabet/ Google was one of the many tech companies to report on Thursday night. Thanks to a strong beat on expectations, the stock managed to close up 3.8% - good going consider the overall beating that the Nasdaq took on Friday. Google reported revenue of $46bn and EPS of $16.20, analysts were only expecting $43bn and $11.18, respectively.
Google is one of the few tech companies not to have a significant increase in value in this new Covid world. This is in part due to their business taking a hit in Q2 as advertisers pulled back ad-spend in the height of Covid lock downs. These Q3 numbers have more than made up of that Q2 drop in revenue. The standout divisions were Cloud and Youtube, which saw growth of 42% and 32% respectively. Adding to the excitement generated from the growth in those two divisions was the fact that Google's overall operating costs increased much slower than expected. Higher than expected revenues, coupled with lower than expected operating costs, resulted in the much higher than expected profits.
The only blemish on Google's income statement is its 'Moonshots" division, which reported a loss of $1.1 billion. Given the profitability of the core business, management has been prepared to give their moonshot plays some runway. If only one of these businesses takes off, shareholders will be well rewarded for their patience. At Vestact, we are still happy holders of Alphabet/ Google.