10-QPeriod: Q1 FY2016

Alphabet Inc. Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 3, 2016For Securities:GOOGLGOOGGOOGMGOOGN

Summary

Alphabet Inc. reported strong financial results for the first quarter of 2016, with revenues growing 17% year-over-year to $20.3 billion. This growth was driven by a 17% increase in the Google segment, which comprises its core internet products like Search, Ads, and YouTube. The "Other Bets" segment also showed revenue growth, albeit from a smaller base. Profitability remained robust, with income from operations reaching $5.3 billion and net income at $4.2 billion, translating to diluted EPS of $6.02. The company maintained a healthy operating cash flow of $7.7 billion, underscoring its strong financial position. Despite significant investments in research and development, Alphabet demonstrated effective cost management, particularly in general and administrative expenses, which decreased year-over-year. The company also highlighted continued growth in paid clicks, although cost-per-click saw a decline, a trend attributed to factors like the growth of YouTube engagement ads and changes in product mix. Alphabet ended the quarter with substantial cash reserves of $75.3 billion, providing ample liquidity for ongoing operations, strategic investments, and potential share repurchases.

Financial Highlights

47 data points
Beta

Revenue

$20.26B

62.2% Gross Margin

Net Income

$4.21B

20.8% Net Margin

EPS (Diluted)

$0.30

Total Assets

$149.75B

Cash & Equivalents

$15.11B

Free Cash Flow

$5.21B

Financial Statements
Beta
Revenue$20.26B
Cost of Revenue$7.65B
Gross Profit$12.61B
R&D Expenses$3.37B
Operating Expenses$14.91B
Operating Income$5.34B
Interest Expense$30.00M
Net Income$4.21B
EPS (Basic)$0.31
EPS (Diluted)$0.30

Key Highlights

  • 1Revenues increased by 17% year-over-year to $20.3 billion, driven by a strong performance in the Google segment.
  • 2Net income rose to $4.2 billion, with diluted EPS of $6.02.
  • 3Operating cash flow remained strong at $7.7 billion.
  • 4The "Other Bets" segment showed significant revenue growth, indicating progress in newer ventures.
  • 5Despite a decrease in cost-per-click, paid clicks increased, reflecting user engagement with advertising products.
  • 6Cash, cash equivalents, and marketable securities stood at a robust $75.3 billion, providing substantial financial flexibility.
  • 7General and administrative expenses decreased year-over-year, showcasing effective cost management.

Frequently Asked Questions

The primary driver of Alphabet's revenue growth in the first quarter of 2016 was the Google segment, which experienced a 17% year-over-year increase. This growth was fueled by core internet products such as Search, Ads, and YouTube.

Alphabet's profitability improved year-over-year. Net income increased to $4.2 billion, and diluted earnings per share rose to $6.02, up from $5.10 in the prior year's first quarter. This was supported by strong revenue growth and effective management of operating expenses.

Alphabet maintained a very strong liquidity position, with $75.3 billion in cash, cash equivalents, and marketable securities as of March 31, 2016. A significant portion, $45.4 billion, was held by foreign subsidiaries, with the company indicating its intent to permanently reinvest these funds outside the U.S. The company's strong cash flow and reserves provide ample resources for operations, strategic investments, and share repurchases.

Alphabet saw an increase in paid clicks, indicating higher user engagement with its advertising products. However, the cost-per-click (CPC) experienced a decline. This trend was attributed to factors such as the growing contribution of YouTube engagement ads (which generally have lower CPCs) and shifts in product and geographic mix. Despite the CPC decrease, overall advertising revenue grew due to the higher volume of paid clicks.