Google revenues an encouraging sign for big tech

A rise in revenue at Google’s parent suggests Silicon Valley might weather the pandemic better than others in the corporate world.

The Google results represent the first public hint of how the major technology companies are faring in the pandemic. Picture: AFP

Google’s parent posted a sustained rise in revenue in the first quarter, suggesting that Silicon Valley might weather the coronavirus pandemic better than others in the corporate world.

Alphabet, an online-advertising powerhouse, reported total revenue of $US41.2 billion for the first quarter, up 13 per cent compared with a year earlier. Though the company doesn’t provide future guidance for earnings and frequently diverges from market expectations, this was a particularly well-timed reveal for a company that has been a model of growth during its 22 years of existence.

Analysts polled by FactSet had expected revenue of $US40.8 billion. The company’s shares gained about 3 per cent in after-hours trading immediately after the release.

The Google results represent the first public hint of how the major technology companies are faring in an economy brought low by the COVID-19 pandemic. The conglomerate’s many arms overlap with rivals like Amazon.com and Facebook that have yet to report earnings.

Snap reported another tech surprise to the upside last week, when it posted growth in users and revenue, sending its shares up more than 30 per cent.

Alphabet’s operating profit came in at $US8 billion, up from $US6.6 billion a year ago. The company makes most of its money from online advertising in areas like search, where many major customers are pulling back sharply in industries including travel and retail. The company’s YouTube unit, on the other hand, has an opportunity to grab eyeballs, and perhaps associated advertising, from homebound users turning to the video platform in lockdown.

Google’s revenue has risen in every quarter of its history.

“People are relying on Google’s services more than ever, and we’ve marshalled our resources and product development in this urgent moment,” Alphabet chief executive Sundar Pichai said in a statement.

Despite the encouraging results, Google showed potential signs of a slowdown across the board. Advertising revenue on the company’s traditional properties like search -- its longtime flagship franchise -- rose 9 per cent, weaker than the historical clip. YouTube advertising revenue, a small but growing part of the company, did better, up 33 per cent. “Other Bets,” a category that includes theoretically more-static outlying efforts like self-driving-car division Waymo, lost more than before.

Questions remain about what comes next. Alphabet’s first-quarter earnings report includes only a few weeks of results during which lockdown orders first swept the US. Some of the company’s biggest advertisers, like travel agencies, entertainment brands and even Amazon, have said they plan to pull back on marketing more -- even if the country opens back up soon without major complications. Morgan Stanley analysts project that online advertising will suffer more this year than it did in the 2008 financial crisis.

Mr Pichai, in a call with analysts, said that March represented “a significant and sudden slowdown in ad revenues.”

Dow Jones Newswires