Google Q2 revenue up 62% at $61.9 bn amid strong demand for online advertising

Net income stood at $18.5 billion

e4m by exchange4media Staff
Updated: Jul 28, 2021 12:14 PM

Alphabet, the parent company of Google, has seen 62% YoY growth in Q2 consolidated revenues at $61.9 billion. Total cost of revenue was $26.2 billion, up 41%, primarily driven by growth in Traffic Acquisition Cost (TAC), which was $10.9 billion, up 63%, followed by growth in other cost of revenues, which was $15.3 billion, up 29%, the largest driver of which was content acquisition costs.

Operating income was $19.4 billion, up 203%, and the operating margin in the quarter was 31%. Other income and expense was $2.6 billion, which primarily reflects unrealized gains in the value of investments in equity securities. Net income was $18.5 billion.

"Our strong revenue performance in the second quarter reflects lapping the impact of COVID on our business, elevated consumer online activity, broad-based strength in advertiser spend, as well as the benefit of excellent ongoing execution by our teams," Alphabet CFO Ruth Porat told analysts.

He further stated that operating expenses were $16.3 billion, up 22%. "In terms of the three component parts of OpEx, first, the increase in R&D expenses was driven primarily by headcount growth. Second, the growth in sales and marketing expenses was due primarily to the ramp-up of spending on ads and promo in contrast to the pull back in the second quarter last year. Finally, the increase in G&A reflects the impact of charges relating to legal matters."

Total Google Services revenues were $57.1 billion, up 63%. Google Search and other advertising revenues of $35.8 billion in the quarter were up 68%. YouTube advertising revenues of $7 billion were up 84%, driven by brand, followed by direct response. Network advertising revenues of $7.6 billion were up 60%, driven by Ad Manager and AdMob.

Other revenues were $6.6 billion, up 29%, primarily driven by growth in YouTube non-advertising revenues, followed by hardware, which benefited from the addition of Fitbit revenues. And finally, Google Play, which lapped the increased level of user engagement that started in Q1 last year due to the pandemic. Google Services operating income was $22.3 billion, up 134%, and the operating margin was 39%.

Google Cloud revenues were $4.6 billion for the second quarter, up 54%. GCP's revenue growth was again above Cloud overall, reflecting significant growth in both infrastructure and platform services.

"Once again, strong growth in Google Workspace revenues was driven by robust growth in both seats and average revenue per seat. Google Cloud had an operating loss of $591 million. As to our Other Bets in the first quarter, revenues were $192 million, the operating loss was $1.4 billion," Porat stated.

In terms of outlook by segment, Porat said that for Google Services, the benefit to revenue growth in Q2 from lapping the effect of COVID last year will diminish through the balance of the year as it begins to lap stronger performance in the second half of 2020.

"In the second quarter, we continued to benefit from elevated consumer online activity and broad-based strength in advertiser spend. We believe it is still too early to forecast the longer-term trends as markets reopen, especially given the recent increase in COVID cases globally," he stated.

Within other revenues, Play revenue growth for the balance of the year will face headwinds due to the impact of lapping elevated engagement in the pandemic, as well as the change in fee structure, which was implemented as of July 1, Porat said.

Alphabet generated a strong free cash flow of $16.4 billion in the quarter and $58.5 billion for the trailing 12 months. "We ended the second quarter with $136 billion in cash and marketable securities," Porat said.

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