Alphabet reports Q3 revenue of $46.17B, up 14% YoY, net income of $11.25B, from $7.07B YoY, Other Bets operating loss grew to $1.1B; stock up 7%+
MOUNTAIN VIEW, Calif. - October 29, 2020 - Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended September 30, 2020.
Alphabet
Context & Ripple Effects
This print is a sharp V-shaped reversal from the prior quarter: Alphabet's Q2 2020 revenue fell 2% YoY and net income slipped to $6.96B as the pandemic hit its ad business, whereas Q3 swings back to double-digit growth and a $11.25B profit. The market read it as confirmation that the Q2 dip was cyclical, not structural, sending GOOGL up more than 7%.
The quarter also extends a longer pattern visible since the 2017 Q3 report: back then revenue was $27.8B and Other Bets lost $812M; three years later revenue has grown ~66% while Other Bets' operating loss sits at essentially the same ~$1.1B level it held through Q1 and Q2 of 2020.
First-order effects
Alphabet's advertising-driven core rebounds immediately from the Q2 decline, restoring double-digit YoY growth (14%) and nearly lifting net income to $11.25B from $7.07B a year earlier.
GOOGL shareholders capture the reversal directly, with the stock up over 7% on the print.
Second-order effects
A recovered core keeps bankrolling the steady ~$1.1B-per-quarter Other Bets burn without pressuring consolidated profitability, removing near-term pressure on Alphabet to prune or spin out its moonshot portfolio.
Competitors in digital advertising face an ad market where Alphabet has already re-accelerated to pre-dip growth rates, tightening the pricing environment for rivals still recovering from the same downturn.
Third-order effects
If the multi-year pattern holds — core revenue compounding while Other Bets losses stay pinned around $1.1B per quarter — Alphabet's structure hardens into one hyper-profitable engine permanently subsidizing a flat-loss bets portfolio, making the eventual monetization (or winding down) of Other Bets a recurring investor question rather than an imminent event.
The trend: Alphabet's pandemic-era results show digital-ad demand snapping back faster than the broader economy, with the core business growing durable enough to fund moonshots at a constant loss indefinitely.
signs of the COVID era, according to $GOOG earnings call: guided meditation video views on YouTube are up 40% and DIY face mask tutorials have been viewed more than 1bn times
Google returns to growth, reporting 14% yy, compared to down 2% in June. The 14% is inline with March and below the 20-24% growth range over the previous 4 years.
Sundar Pichai just announced Google $GOOGL will start breaking out Google Cloud as separate reporting segment, similar to how $AMZN does it. Already breaks out revenue, so presume this is P&L. https://www.cnbc.com/...
Alphabet “total revenues of $46.2 billion in the third quarter reflect broad based growth led by an increase in advertiser spend in Search and YouTube as well as continued strength in Google Cloud and Play,” CFO Ruth Porat says https://abc.xyz/...
$GOOGL is back (for now). The underperforming big tech name (YTD) now the outperformer in after hours. Up >9% Advertising rev returned to growth Cloud rev +45% YouTube, Play beating expectations CEO Pichai says they will they will further break out cloud as reporting segment
Alphabet's stock popped 8% as it showed a strong rebound in its core advertising business, which was hit hard by customer spending pullbacks amid the Covid-19 pandemic. https://www.cnbc.com/...
Ruth Porat just confirmed that $GOOGL will in fact break out operating income for its cloud biz starting Q4, including full-year 2018 and 2019. https://www.cnbc.com/...
Alphabet earnings “YouTube has over 30 million music and premium paid subscribers and YouTube TV has more than 3 million subscribers.” https://www.cnbc.com/... // this after pummeling ~150M DAU for years #limitsofcrosspromotion