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Jul 30, 2020

Alphabet beats revenue estimates buoyed by cloud and YouTube

Anti-trust hearing might 'mark the beginning of the end of big tech': Scott Galloway

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Alphabet Inc.’s first drop in revenue in at least a decade wasn’t as bad as analysts’ expected as advertisers ravaged by the coronavirus pandemic relied on the internet giant to connect with people stuck at home.

The Google parent reported revenue declined two per cent from a year ago. Excluding payouts to partners, sales totalled US$31.6 billion, compared with the average analyst estimate of US$30.4 billion. YouTube, the fastest-growing part of Google’s advertising empire before the coronavirus set in, brought in US$3.8 billion, six per cent more than last year.

Chief Financial Officer Ruth Porat had tamped down expectations in April, warning the second quarter would be “difficult” for the company’s ad business. But investors still pushed the company’s shares higher as part of a broader tech rally in the last few months. Alphabet’s shares have gained about 15 per cent this year. The stock rose slightly in extended trading.

Alphabet makes the bulk of its money from online advertising in areas like search, where customers in travel and retail have curtailed spending, and YouTube, which has benefited from more people watching videos while stuck at home during lockdown. Still, continued uncertainty in the U.S. as virus cases mount and the government struggles to pass a new round of stimulus funding has made marketers hesitant to jump back in.

Even though the overall amount of money dedicated to ads has shrunk, the results indicate Google may be winning a larger portion of what is left. Unlike traditional ad formats such as television, radio and print, spending on Google’s digital tools can be ramped up or scaled down in a more flexible way. That’s appealing to advertisers in a deeply uncertain climate.

Cloud revenue was US$3 billion, up 43 per cent from the same quarter last year, the Mountain View, California-based company said in a statement Thursday. That rate of growth was lower than the 52 per cent the business saw in the first quarter.