10-QPeriod: Q2 FY2021

Alphabet Inc. Quarterly Report for Q2 Ended Jun 30, 2021

Filed July 28, 2021For Securities:GOOGLGOOGGOOGMGOOGN

Summary

Alphabet Inc. reported strong financial results for the quarter and six months ended June 30, 2021, demonstrating significant year-over-year growth across key metrics. Total revenues surged by 62% to $61.9 billion for the quarter and reached $117.2 billion for the six-month period, an increase of 47% compared to the prior year. This growth was primarily fueled by a robust performance in the Google Services segment, which saw a 63% increase in revenue, driven by strong advertising revenues from Search, YouTube, and the Google Network. The Google Cloud segment also exhibited substantial growth, with revenues up 54% year-over-year. Net income experienced a significant jump, reaching $18.5 billion for the quarter, a 166% increase from the prior year, and $36.5 billion for the six-month period, up 164%. Diluted Earnings Per Share (EPS) followed suit, rising to $27.26 for the quarter and $53.54 for the six months. The company's operating income margin improved significantly to 31% in the quarter, up from 17% in the prior year, reflecting improved operational leverage and the favorable comparison to the COVID-19 impacted prior year period. The company also continued to invest heavily in its technical infrastructure and returned capital to shareholders through significant share repurchases.

Financial Highlights

49 data points
Beta

Revenue

$61.88B

57.6% Gross Margin

Net Income

$18.52B

29.9% Net Margin

EPS (Diluted)

$1.36

Total Assets

$335.39B

Cash & Equivalents

$23.63B

Free Cash Flow

$16.39B

Financial Statements
Beta
Revenue$61.88B
Cost of Revenue$26.23B
Gross Profit$35.65B
R&D Expenses$7.67B
Operating Expenses$42.52B
Operating Income$19.36B
Interest Expense$76.00M
Net Income$18.52B
EPS (Basic)$1.38
EPS (Diluted)$1.36

Key Highlights

  • 1Total revenues reached $61.9 billion for the quarter, up 62% year-over-year, driven by strong performance across all segments.
  • 2Net income for the quarter was $18.5 billion, a substantial 166% increase compared to the prior year.
  • 3Diluted EPS grew to $27.26 for the quarter, reflecting the strong earnings growth.
  • 4Google Services revenue increased by 63% year-over-year, primarily driven by advertising across Search, YouTube, and the Google Network.
  • 5Google Cloud revenue grew by 54% year-over-year, indicating continued expansion in the enterprise sector.
  • 6Operating income margin significantly improved to 31% in the quarter, up from 17% in the prior year.
  • 7Alphabet repurchased approximately $12.8 billion of its Class C capital stock during the quarter.

Frequently Asked Questions

The primary driver of Alphabet's revenue growth was the strong performance of its Google Services segment, which increased by 63% year-over-year. This growth was largely fueled by a surge in advertising revenues across Google Search, YouTube, and the Google Network. The company also noted that the prior year's comparable period was unfavorably impacted by COVID-19, contributing to the significant year-over-year percentage increase.

The Google Cloud segment demonstrated robust growth, with revenues increasing by 54% year-over-year to $4.6 billion. This growth was primarily driven by Google Cloud Platform (GCP) services, followed by Google Workspace offerings. While still operating at a loss, the operating loss for Google Cloud decreased significantly to $591 million, down from $1.4 billion in the prior year's quarter, indicating improving operational efficiency.

Alphabet continued its aggressive share repurchase program. During the quarter, the company repurchased approximately $12.8 billion of its Class C capital stock. As of June 30, 2021, approximately $43.5 billion remained available under its authorized repurchase program. The company stated that these repurchases are executed from time to time based on market conditions and do not have an expiration date. In July 2021, the board also approved repurchasing Class A shares in addition to Class C shares.

Alphabet is involved in several ongoing antitrust investigations and legal proceedings in the United States and Europe. These include investigations and lawsuits related to its advertising technology business, Android, and search practices. While the company believes these complaints are without merit and is defending itself vigorously, adverse outcomes could potentially lead to substantial fines, injunctive relief, or other significant business impacts. The company also has significant fines from the European Commission pending appeal, which are recognized as liabilities.