The Alphabet Inc. (NASDAQ: GOOGL) stock price has been hit in after-hours trading today.
Alphabet is the parent company of Google. This morning Alphabet released its quarterly report. Here’s what you need to know.
Alphabet Inc. is headquartered in Mountain View, California. It was created through a corporate restructuring of Google in 2015 and became the parent company of Google and several former Google subsidiaries. Alphabet is one of the largest companies in the world with a market capitalisation of close to $900 billion.
The 5 Key Points
- Google reported a 19% increase in constant currency revenues year-over-year, compared to 23% in Q1 2018
- Operating margin was 18%, compared to 25% in Q1 2018
- Net income fell from $9,401 million to $6,657 million
- Diluted earnings per share fell from $13.33 to $9.50
- The number of employees increased by more than 15,000
What Hurt The Results?
Alphabet was recently fined $1.7 billion after the European Commission made the decision that, “contractual provisions in agreements that Google had with AdSense for Search partners infringed European competition law”.
The fine had a very real impact for Alphabet’s bottom line. A table included in Alphabet’s quarterly report shows that without the fine, diluted EPS would’ve been $11.90 instead of $9.50. Net income would’ve been $8,339 million instead of $6,657 million.
The fine ultimately affected Alphabet’s operating margin, EPS, operating income and net income.
However, it should be noted that even without the fine, Alphabet’s performance was not as strong as it was Q1 2018. Net income would all have still been lower than the prior corresponding period.
It wasn’t all bad though, with revenue still 17% higher than Q1 2018. Chief Financial Officer Ruth Porat made sure to point this out.
“We delivered robust growth led by mobile search, YouTube, and Cloud with Alphabet revenues of $36.3 billion, up 17% versus last year, or 19% on a constant currency basis”, she said.
“We remain focused on, and excited by, the significant growth opportunities across our businesses.”
In addition to the European fine, analysts surveyed by Factset expected revenue to come in slightly higher than that it did.
Investors Didn’t Like This Report
In after-hours trade on the NASDAQ, Alphabet shares have fallen 7.3% in response to the news. This report clearly shows the full impact that the fine and slight revenue miss has had on Alphabet and it also shows that growth has been slightly slower so far this year.
Despite this, Alphabet is a phenomenal company with a competitive advantage that only a handful of other companies have. Their ability to put such large quantities of their revenue into research, development and innovation will ensure they continue growing revenue at a rate much faster than most other businesses.
If you’re looking for some home-grown quality companies to invest in, check out the free report below.
NEW INVESTING REPORT - SEP. 2019!
Finding ASX shares offering exceptional long term growth and dividends over 3% is rare. Our expert investors have just released a FREE investing report which reveals 3 proven ASX shares.
These three companies have proven themselves to be reliable dividend + growth shares over a decade. Click here to get instant access to the investing report -- updated September 2019.
Absolutely no credit card details or payment required.
Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
Disclaimer: At the time of writing, Max does not own shares in any of the companies mentioned.