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For Google, Cloud Diversification Pays Off

May 03, 2020 4:19 AM ETAlphabet Inc. (GOOG), GOOGL4 Comments
Sramana Mitra profile picture
Sramana Mitra


  • Google's Q1 results - while revenues outpaced market expectations, the company acknowledged uncertainty for Q2.
  • Google's advertising revenues may be hurting, but its Cloud segment will help drive growth.
  • Cloud computing revenues grew 34% over the quarter to $2.78 billion as the world migrated to work at home models.

According to the Interactive Advertising Bureau, 70% of media buyers are planning to change their advertising spending plans due to the coronavirus. Advertising giants like Google (NASDAQ:GOOG) (NASDAQ:GOOGL) began witnessing these changing patterns in March. Google recently announced its first quarter results and while revenues outpaced market expectations, the company acknowledged the uncertainty for the second quarter. Google's advertising revenues may be hurting, but its Cloud segment will help drive growth.

Alphabet's Financials

Alphabet's first quarter net revenues grew 13% to $41.16 billion, ahead of the market's forecast of $40.33 billion. Net income grew from $6.66 billion a year ago to $6.84 billion. Adjusted earnings of $9.87 per share were lower than the market's forecast of $10.38 per share.

By segment, Google Properties revenue rose 11.6% to $28.54 billion, below estimates of $29.07 billion. Google Properties revenues includes ad and services revenue from internet search, Gmail, Google Play, and YouTube. YouTube revenue rose 33% to $4.038 billion. Google's net revenue, excluding traffic acquisition costs (TAC), of $33.7 billion was better than the market's forecast of $33.2 billion. TAC rose 9% to $7.45 billion compared with the estimates of $7.75 billion. Revenues from Other Bets fell from $170 million a year ago to $135 million for the quarter.

According to management, Google's display ad revenues dropped by more than 10% in March as marketing budgets globally were cut in reaction to the lockdowns. The Covid-19 slowdown has hurt advertising revenue from travel, auto, and retail sectors. But besides large players cutting down their marketing costs, Google will also be hurt by the recessionary conditions that will hurt small businesses. Google believes that the current quarter will be a difficult one for it, and in reaction, the company is expected to be looking at cost optimization opportunities by reducing hiring and cutting

This article was written by

Sramana Mitra profile picture
Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual accelerator that aims to help one million entrepreneurs globally to reach $1 million in revenue and beyond. She is a Silicon Valley entrepreneur and strategy consultant, she writes the blog Sramana Mitra On Strategy, and is author of the Entrepreneur Journeys book series and Vision India 2020. From 2008 to 2010, Mitra was a columnist for Forbes. As an entrepreneur CEO, she ran three companies: DAIS, Intarka, and Uuma. Sramana has a master’s degree in electrical engineering and computer science from the Massachusetts Institute of Technology. Full bio can be found at http://www.sramanamitra.com/bio/

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