Alphabet reports first revenue decline in company history

  • Google parent-company Alphabet reported its first revenue decline in history. 
  • The company beat most expectations with the exception of its Cloud division.

Google parent-company Alphabet beat expectations for its second quarter earnings Thursday, marking its first revenue decline in the company's history. The company's stock barely moved after hours.

Here's how it did against Refinitiv consensus estimates: 

  • EPS: $10.13 (non-GAAP), vs. $8.21 estimated.
  • Revenue: $38.30 billion vs. $37.37 billion estimated.
  • YouTube advertising revenue: $3.81 billion vs. $3.78 billion, according to StreetAccount estimates
  • Google Cloud revenue: $3.01 billion vs. $3.06 billion, as per StreetAccount
  • Traffic acquisition costs (TAC): $6.69 billion vs. $6.67 billion, as per StreetAccount

The company's board also authorized the company to repurchase up to $28 billion of its Class C shares.

CFO Ruth Porat said on an earnings call that consumers returned to more "commercial" search queries toward the end of the quarter, and advertisers began increasing their search spending, so search revenue ended the quarter about even from last year.

As a result of the customer pullbacks amid the Covid-19 pandemic and the general maturing ad market, Alphabet itself cut marketing spending by half and instituted hiring freezes for the second half of the year in anticipation of a slowdown, CNBC reported. Around that time, Alphabet CEO Sundar Pichai said Google would be pulling back on some of its investments for the rest of the year amid the Covid-19 crisis, starting with hiring. 

Revenue from "Other Bets," which includes Alphabet's self-driving car business Waymo as well as life sciences company Verily, fellto $148 million compared to $162 million in the same quarter the year prior. The Other Bets showed an operating loss of $1.11 billion during the quarter.

"We believe it is premature to gauge the durability of recent trends, given the obvious uncertainty of the global macro environment,"  Porat said on Thursday's call.

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