10-QPeriod: Q1 FY2021

Alphabet Inc. Quarterly Report for Q1 Ended Mar 31, 2021

Filed April 28, 2021For Securities:GOOGLGOOGGOOGMGOOGN

Summary

Alphabet Inc. reported a strong first quarter for 2021, with total revenues reaching $55.3 billion, a significant 34% increase year-over-year. This robust growth was primarily fueled by the Google Services segment, which saw a 34% increase in revenue, and the Google Cloud segment, which grew by 46%. The company's operating income more than doubled, increasing from $8.0 billion to $16.4 billion, resulting in a substantial improvement in operating margin from 19% to 30%. This performance was bolstered by a favorable year-over-year comparison due to the impacts of COVID-19 in the prior year, alongside strong consumer and advertiser spending in the current period. The company also benefited from a change in accounting estimate related to the useful life of servers and network equipment, which reduced depreciation expense and boosted net income.

Financial Highlights

49 data points
Beta

Revenue

$55.31B

56.4% Gross Margin

Net Income

$17.93B

32.4% Net Margin

EPS (Diluted)

$1.31

Total Assets

$327.10B

Cash & Equivalents

$26.62B

Free Cash Flow

$13.35B

Financial Statements
Beta
Revenue$55.31B
Cost of Revenue$24.10B
Gross Profit$31.21B
R&D Expenses$7.49B
Operating Expenses$38.88B
Operating Income$16.44B
Interest Expense$76.00M
Net Income$17.93B
EPS (Basic)$1.33
EPS (Diluted)$1.31

Key Highlights

  • 1Total revenues grew 34% year-over-year to $55.3 billion, driven by strong performance across Google Services and Google Cloud.
  • 2Operating income more than doubled to $16.4 billion, with the operating margin expanding significantly to 30% from 19% in the prior year.
  • 3Net income surged to $17.9 billion, up from $6.8 billion in the first quarter of 2020, leading to a diluted EPS of $26.29.
  • 4Google Services revenue increased by 34% to $51.2 billion, with Search & other, YouTube ads, and Google Network all showing substantial growth.
  • 5Google Cloud revenue grew by 46% to $4.0 billion, demonstrating continued strong adoption by enterprise customers.
  • 6The company made significant share repurchases, spending $11.4 billion in the quarter and authorized an additional $50 billion repurchase program.
  • 7A change in accounting estimate for server and network equipment useful lives reduced depreciation expense by $835 million, boosting net income by $650 million.

Frequently Asked Questions

Alphabet's revenue growth was primarily driven by strong performance across its Google Services segment, which includes advertising (Search, YouTube, Network), Google other (Play, hardware, YouTube subscriptions), and its Google Cloud segment. The company benefited from broad-based increases in advertiser spending and continued elevated consumer activity online. Favorable year-over-year comparisons due to the impacts of COVID-19 in the prior year also positively affected growth trends.

In January 2021, Alphabet adjusted the estimated useful lives of its servers and certain network equipment. This change in accounting estimate resulted in a reduction of depreciation expense by $835 million for the first quarter of 2021, which in turn increased net income by $650 million, or approximately $0.97 per basic share and $0.95 per diluted share. This positively impacted both the income statement and cash flows by reducing expenses.

Google Cloud continues to show strong growth, with revenues increasing by 46% year-over-year to $4.0 billion in Q1 2021. The growth was primarily driven by Google Cloud Platform (GCP) and Google Workspace offerings. Despite the significant revenue growth, the segment still reported an operating loss of $974 million, although this loss decreased significantly from $1.7 billion in the prior year. This indicates continued investment in the segment alongside substantial revenue expansion.

Alphabet demonstrated a strong commitment to returning capital to shareholders by repurchasing $11.4 billion of Class C capital stock in the first quarter of 2021. The company also authorized an additional $50.0 billion share repurchase program. Regarding debt, the company had approximately $13.9 billion in long-term debt as of March 31, 2021, with no commercial paper outstanding. They also have significant credit facilities available, having recently entered into new agreements totaling $10.0 billion.