Alphabet Inc. (GOOG) on Q2 2021 Results - Earnings Call Transcript

Operator: Welcome, everyone. Thank you for standing by for the Alphabet Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, Jim Friedland, Director of Investor Relations. Please go ahead. Jim Friedland: Thank you. Good afternoon everyone and welcome to Alphabet’s second quarter earnings conference call. With us today are Sundar Pichai, Philipp Schindler and Ruth Porat. Sundar Pichai: Thank you, Jim. And good afternoon, everyone. It’s good to be with you. Today, I'll give an overview of the quarter, going through some of our product momentum, then touching on Cloud and YouTube. First, I want to acknowledge that the new COVID-19 variants have been challenging for so many communities across the world. As the pandemic evolves, we want to help people get the information they need to keep themselves and their families safe. I really encourage everyone to get the vaccine when it's available to you. Turning to the quarter, we saw a rising tide of online consumer and business activity. We are proud that our services helped so many businesses and partners. In fact, we set a number of records this quarter. This quarter, publisher partners earned more than they ever have from our network. We also paid more to YouTube creators and partners than in any quarter in our history. And on top of that, over the past year, we have sent more traffic to third-party websites than any year prior, in addition to generating billions of direct connections like phone calls, directions, ordering food and making reservations that drove customers and revenue to businesses around the world that are working to get back on their feet. A few years ago, we placed a bet on AI believing that it would be a fundamental technology that would underpin and dramatically improve all our products. That vision was on full display at our I/O event in May where we announced new advancements that will be helpful to people and businesses everywhere. As one example, we introduced Multitask Unified Models or MUM. MUM is a big advancement in Search, a thousand times more powerful than our current systems. It has the ability to learn and transfer knowledge across 75 languages, which means that it can learn from sources in one language and help bring that information to you in another. Philipp Schindler: Thanks, Sundar. And hello, everyone. It's great to be with you today. We are pleased with the growth in Google Services revenues in the second quarter. Year-on-year performance reflects elevated consumer online activity, broad based strength in advertiser spend and the lapping of the first ever revenue decline in our Ads business last year due to COVID. In the second quarter, retail, again, was by far the largest contributor to the year-on-year growth of our Ads business. Travel, financial services and media and entertainment were also strong contributors. Let's now take a few minutes to talk about the trends we've seen across our business. Over the last 18 months, we've been deeply focused on helping businesses, big and small, navigate profound change. First, as a lifeline during the pandemic, and now, as a partner to reaccelerate growth as the world begins to reopen. The road to global recovery is likely to be uneven and unpredictable. That's why the real-time insights we've put in the hands of businesses going into the pandemic will be just as important coming out of it. New tools like Travel Insights, which launched in the US this month after rolling out to select countries in APAC and EMEA in December, are helping our partners get a clearer picture of where demand is coming from. Ruth Porat: Thank you, Philipp. 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. My comments will be on year-over-year comparisons for the second quarter, unless I state otherwise. We'll start with results at the Alphabet level, followed by segment results, and conclude with our outlook. For the second quarter, our consolidated revenues were $61.9 billion, up 62%, or up 57% in constant currency. Our total cost of revenue was $26.2 billion, up 41%, primarily driven by growth in 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 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 pullback in the second quarter last year. Finally, the increase in G&A reflects the impact of charges relating to legal matters. Headcount was up 4,061 from the first quarter. Operating income was $19.4 billion, up 203%, and our 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. Let me now turn to our segment financial results, starting with our Google Services segment. 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%, with broad-based strength across our business, led again by strong growth in retail. 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%. Turning to the Google Cloud segment. 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. Let me close with some comments on our outlook. In the second quarter, revenues benefited from an FX tailwind of more than 4% at the consolidated level. Based on FX spot rates against the dollar relative to the third quarter of last year, we expect a more muted tailwind to revenues in the third quarter. In terms of outlook by segment, 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 we begin 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. 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. We continue to invest across Google services to support the extraordinary opportunities we see. A couple of reminders consistent with prior years, we expect that headcount additions will be seasonally higher in Q3 as we bring on new graduates. In addition, we expect sales and marketing expenses to be more heavily weighted to the back half of the year, in part, to support product launches in the holiday season. As for Google Cloud, we remain focused on revenue growth and are pleased with the trends we are seeing. Across Cloud, we will continue to invest aggressively, given the opportunity we see. Turning to CapEx. The results in the second quarter primarily reflect ongoing investment in our technical infrastructure, most notably in servers, to support ongoing growth across Google. We also began to increase the pace of investment in ground up construction and fit outs of office facilities, which were slowed due to COVID and are focused now on advances Turning to cash and capital allocation. We continue to generate 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. As we indicated in our press release today, our Board has approved an amendment to the existing $50 billion stock repurchase program permitting us to repurchase both Class A and Class C shares in a manner that's in the best interest of the company and its stockholders. Thank you. And now, Sundar, Philipp and I will take your questions. Operator: Thank you. And our first question comes from Brian Nowak with Morgan Stanley. Your line is open. Brian Nowak: Thanks for taking my question. I have two. One for Sundar and one for Philipp. Sundar, the first one is you've had so much innovation over the years using AI to improve Search and improve the overall business. Can you just give us some examples of where you still see low hanging fruit or areas for further improvement in the company's overall products using AI, et cetera, over the next couple of years? And then, Philipp, your comments on omnichannel were pretty loud and clear. Give us some examples of where you're most focus to continue to enable more retailers to move in the omnichannel sort of drive that side of the business? Thanks. Sundar Pichai: Brian, thanks. You know, a couple. We see so much headroom given our bet on AI, going to our most important product of all, Search. When you see the launch of Bird, which was a significant improvement, and we are following that up with MUM, which is another extraordinary advance. So the rate information is growing, pretty rapidly. And so constantly developing better models to improve our search quality ranking, et cetera, is one of the most important ways we invest. Beyond that, I would say, all the work we are doing into making sure computers can understand in a multimodal way, be it images, audio, text, video, and then bringing it across our products, I think, is an important way we'll approach it. Philipp? Philipp Schindler: Yes. And to my part of the question, look, we want to make sure that when people come to Google, they are able to basically find the best products and prices available from, frankly, the widest possible range of merchants. And we're making strong progress under Bill's leadership. And as I said earlier, 2020 was about removing financial barriers. We made listings free, removed commission fees. And it's worth pointing out the upside of combining free listings with shopping ads actually. Merchants that used both in Q1 saw a 50% lift in clicks once they started, I think that's pretty impressive. 2021, as I said, has been about removing integration barriers. We have the partnerships with Shopify, Square, BigCommerce, GoDaddy, WooCommerce and so on. And they're making it easier for businesses to get started with us, whether it's across Search and Shopping and image search and YouTube. And then once merchants are onboarded, I mean, there's so much more value we can offer them. We launched a new measurement tools to help retailers better understand performance and pricing. You asked specifically a question about focus areas. And then we're making the product and user experience better, not only with our UI/UX research feedback with our tech and AI capabilities. And maybe a cool example is how we're using AR to bring in-store experiences online, like with auto dealerships, and then letting users really try before they buy. And we do this in cosmetics and in apparel categories. And we have the shopping graph, which I mentioned earlier. We think it will open up completely new product experiences across Google. Shopping with Lens is one example. You can shop your screen shots or use your phone camera to find the dress or pair of sneakers that caught your eye or whatever. And we're working hard to build an open retail ecosystem, and that really levels the playing field for all merchants, and we think there is a lot of opportunity ahead. And I think those are our biggest areas of focus. Brian Nowak: Great. Thank you, both. Operator: Thank you. Our next question comes from Doug Anmuth with JPMorgan. Your line is open. Doug Anmuth: Great. Thanks for taking the question. I have two. First, just I think the key initiative over the last couple of years has been to bring the full breadth of Google Services to customers. So I was hoping you could talk more just about - when you think about the Search and overall ads recovery, and then also growth in Google Cloud, how those efforts are going as you work across businesses with corporate customers and what their reception has been? And then, Ruth, just on costs kind of in the back half and going forward, as you think about bringing some of these costs back, just curious if you can comment more around some of the puts and takes as you think about the overall cost structure pre COVID versus post COVID? Thanks. Sundar Pichai: Yeah. Thanks, Doug. I would say, overall, as you realize, it's a broad digital shift, customers are looking for digital transformation. And depending on the sector they are in, they look to Alphabet as a digital partner, and we try to bring the broader solution set that's possible across our capabilities, and that's been working well. You mentioned Cloud, most of our Cloud customers are either in conversations with us. It could be because they're concerned about security on their supply chain or they're trying to understand the shift to digital and invest more in data analytics. Or the shift to hybrid workforce is what's probably getting them to think about Workspace and so on. And if they are retailers, we can bring in our expertise across ads, the work we are doing on commerce to be - with the partnerships we have, and so we can bring those additional expertise to bear. And so that's a trend we are seeing across. Philipp gave examples of our telco partnerships. And so across our priority verticals, we are able to engage in a broad way. And maybe the recent Google-wide partnership with Univision was another example of a multiyear, multi-product partnership with companies. Ruth Porat: And with respect to the second question, how we think about investments in the back half. Really, the driving focus is how do we support near term, long term quality growth. And I think it's important to note that some of our costs are less variable in the short term, such as depreciation and the operations cost of our data centers. So when you look at Q2 performance, in part, the meaningful year-on-year improvement in the operating margin in the second quarter, clearly reflects the strong revenue growth, but also the fact that some of these costs are less variable in the short term. However, to support long term growth, and very much to your question, it's true across both Google Services and Google Cloud, we will continue to increase the pace of investment. And that's true in headcount, it's true with compute, sales and marketing, really across the board. And you also heard that in some of my comments about CapEx. We're continuing to pick up the pace of investment in office facilities. Both fit outs and ground up construction have been slowed as a result of COVID, and we're pleased that the pace has picked up, and that really relates to our comments about continuing to build out across the US, around the globe, in line with continuing to invest in headcount growth. I'd make one other point, which is, I think you're aware of this, but in this quarter, the results also reflect the benefit from the change in useful lives that we talked about earlier in the year that reduced depreciation expense. It's a benefit of about $721 million in the quarter, and the benefit from this change will be lower in the second half as you're looking ahead. Doug Anmuth: Great. Thank you, Sundar and Ruth. Operator: Thank you. Our next question comes from Justin Post with Bank of America. Your line is open. Justin Post: Great. Thanks for taking my questions. A couple, when you look at Search in the quarter, it really accelerated beyond the comp. And if you look at it quarter-over-quarter, it was really good. So wondering if there's any products or verticals that really surprised you, or things to call out. And how do you think about the sustainability here, specifically in Search and the product pipeline from here? And then secondly, on Cloud, really saw a nice margin improvement there. How do you feel about where you are on the infrastructure side and ability to really continue to show kind of that improvement in margins over time? Thank you. Sundar Pichai: Two questions, maybe I'll take the second first. On the Cloud side, first of all, we do investments in our infrastructure. First of all, we are doing it across a set of cloud services we are building for Google. And it's the same that we bring to Cloud, and so there's tremendous synergies we have there. And maybe to give you an example of it, I already mentioned data analytics and processing. It's the same infrastructure, be it BigQuery, et cetera, which we have invested and built over time. And people are looking to use data analytics alongside with machine learning and AI. They want to do this across structure and unstructured data, do it across any platform. And so that's the kind of capability we are able to bring. And overall, I'll let Ruth comment on maybe the margin side of this a bit more. Ruth? Ruth Porat: Yeah. I would just build on Sundar's comment. There's really no change in our approach to building the Cloud business. We do intend to continue to invest meaningfully. We are very pleased with the business, as we both said. As an example, we're continuing to build out the global footprint, continuing to invest in our compute capacity globally. As an example, we most recently announced a second cloud region in India. This is our 26th cloud data center region globally. And so continuing to invest across the board, given the opportunity that we see. And as I said last quarter, I would not extrapolate from quarter-to-quarter, given we still are in the early stages of building the business, and we do intend to continue to invest aggressively, including expanding our go to market organization, our channel expansion, our product offerings and our compute capacity. Excited about what we're seeing the team executing upon here. Sundar Pichai: On Search, to answer the first part of your... Philipp Schindler: Yeah, can you hear me? Sundar Pichai: Yeah. Philipp Schindler: Yeah. And to the first part of the question, similar to what I said in my remarks at the beginning, retail was again, by far the largest contributor to the year-on-year growth of our ads business. Travel, financial services, media entertainment were also very, very strong contributors. Justin Post: Thank you. Operator: Thank you. Our next question comes from Colin Sebastian with Baird. Your line is open. Colin Sebastian: Thanks for taking my questions. First, Sundar, as a follow-up on Cloud, you talked about the tailwinds from advanced AI and data analytics in terms of growth. Is it fair to say as well based on your initial comments that security also represents some competitive differentiation that's contributing incrementally to business development? And then for Philipp, in the momentum in YouTube and capturing the shift in viewership and advertising away from linear TV, how do the different Google Services fit together in that? Not just core YouTube, but Android TV, Google TV, YouTube TV. Is this something that's been increasingly connected or linked in the back end and as well on the front end for consumers? Thanks. Sundar Pichai: On security and cloud, we definitely see it as a strong differentiation. Obviously, Google for a long time. We are cloud native. We pioneered approaches like Zero Trust, built the architecture out from a security first perspective. And so particularly over the course of the last couple of years, as companies have really - with the recent attacks, they really started thinking deeply about the vulnerabilities, supply chain security has been a major source of consensus, particularly over the past few quarters. Cyber threats, increasingly, is in the mind of not just CIOs, but CEOs across our partners. And so it's definitely an area where we are seeing a lot of conversations, a lot of interest. It's our strongest product portfolio, and we are continuing to enhance our solutions, be it integrating Chronicle, BeyondCorp and all the product components we have there. So a definite source of strength and you'll continue to see us invest here. Philipp Schindler: And on the second part of your question, look, momentum is really strong across both our brand and direct response business on YouTube. Maybe let me start on the brand side. The global shift to online video and streaming continues, with over like 2 billion monthly active users now, 1 billion plus hours of video watched every day. I think we're at the forefront of this shift. And advertisers have increasingly needed to look beyond linear TV alternatives to achieve their reach and awareness goals. And as I said earlier, Nielsen total ad ratings reach reporting has found, on average, 70% of YouTube's reach was delivered to an audience, not reached by the advertisers TV media. So not only are we driving improved reach, but we're also helping brands do it more efficiently. And as a result of this, you see many advertisers re-evaluating the media mix and increasing their investments in our platforms. And as far as the direct response part goes, we're helping advertisers convert intent into action. We try to drive performance at an incredible scale. Take an example like with video action campaigns, which is our next-generation TrueView for Action format. Advertisers are getting access to even more inventory across YouTube and our partners, all in a single automated campaign. And as I said before, we're working really hard to make YouTube not only more actionable, but also more shoppable. So YouTube is proving to be meaningful for not just brand building and reaching a massive audience, but also for converting viewers into buyers. And what's nice is that we're seeing more advertisers leveraging brand to create demand and direct response to convert it. So they're basically using the funnel very, very smartly. And then to the second part of your second question, the YouTube TV ads, for example. This part, we're really trying to bring the - well, connected TV is - let me phrase it from a connected TV part. I think that's easier. It is really the fastest growing consumer service that we have. And that growth started before the pandemic and has frankly solidified since. And in the US, we have over 120 million people watch YouTube on TVs every month, and that's up from like 100 million last year. We're number one in reach and watch time among ad-supported streaming services. So we're very, very happy with the development that we're seeing here. Operator: Thank you. Our next question comes from Brent Thill with Jefferies. Your line is open. Brent Thill: Thanks. Just a follow-up on YouTube. Can you maybe talk to the e-commerce opportunity that you're seeing evolve? Where you're at now, and eventually, where would you like to be? Thank you. Sundar Pichai: On YouTube, look, I mean, if you look at the engagement across the platform, we definitely see a lot of headroom for e-commerce. Over the past year, you've seen us really focus on ads rating a shift to - in terms of onboarding merchants across Google. So we have definitely invested both in terms of bringing merchants on board, removing barriers there, providing better integrations by partnering with players, platform providers across the industry. And now we are investing in our consumer experiences, be it on Google Search or on YouTube. And so you will see us roll out features over time. Philipp, do you want to add more here? Philipp Schindler: Yeah. Look, there's a ton of commercial intent across YouTube, and it was a shopping destination before COVID. I mean, think un-boxing videos, product reviews, make up tutorials and so on. And throughout the pandemic, we've really seen more shoppers turn to the platform for ideas, inspiration and really help them decide what to buy. And a number of shopping capabilities' already underway, and we're working really hard to make it easier for users to discover and buy directly on YouTube. And I mentioned how a merchant can globally add their product feeds now right into video action campaigns, and brands and shoppers alike are loving it, and we've also done beta testing this, for example, with Discovery Ads. And last quarter, I mentioned how viewers can make purchases from their favorite creators via early experiments with brand connect and shop with product shelves, and early adopters are seeing a lot of success here. So stay tuned for more updates later this year. Brent Thill: Great. Thank you. Operator: Thank you. Our next question comes from Mark Mahaney with Evercore ISI. Your line is open. Mark Mahaney: Thanks. We've had record new business formation in the US, and I think globally in the wake of COVID. And my guess is that, that's also been a major driver of growth for you. Could you just talk about that a little bit to the extent to which you think some of these, especially the advertising trends, come from these new businesses that are formed, whether they're digital hybrid or whatever? And then secondly, how do you go from tens of thousands of Waymo rides to millions of rides? Like what are the biggest obstacles to that? Any clue at all as to how long that takes, are the issues more regulatory, more technical? Thank you. Philipp Schindler: Look, new businesses, small businesses are the backbone of our economy here. But obviously, local communities are in varying stages of recovery. Some are reopening, while others are, unfortunately, returning to lockdown. And we're focused on continuing to, I would say, level the playing field for SMBs here. And from getting them online and, frankly, set up for success, you're giving them all the digital tools they need to get discovered and be ready for what's ahead. This includes the ability to like seamlessly transition between online and offline and reach customers nearby, far beyond their local neighborhoods as well. So over the past few months, I mean, literally, just the past few months, we've made it easier for SMBs to show their products across Google for free, and we added new ways for them to highlight in-store inventory through local inventory ads. And we've also made it easier for them to leverage the power of YouTube. They now can create video ad campaigns literally within minutes via their smartphone. And these are just a few examples of the ways we're helping. Plus, also interesting trend, people are more eager than ever to support their local small businesses. Searches for support local business are up like 20x last year in the US alone. And this is creating a lot of opportunity for SMBs overall. And I don't know, take an example, like Ayla Beauty for example, it's a San Francisco beauty brand. They made 100% pivot to online during the pandemic. And with insight into popular wellness and beauty searches and Google Ads, has been really able to grow their business significantly over the last year. Sundar Pichai: On Waymo, as you mentioned, in our - in Phoenix, we've had very good experience by scaling up rides. These are driverless rides and no one else in the car other than the passengers, and people have had a very positive experience overall. We are obviously with a strong focus on safety. We're looking to scale it up. Through it all, we are building newer capabilities as well investing in next-generation of hardware and software. So it's an iterative process, and at each step, it's very clear to us that we are ahead, and we are making progress, and you'll see us continue to invest here, with a focus on safety first, and I expect this to scale up more through the course of 2022. Mark Mahaney: Thank you, Sundar. Thank you, Philipp. Operator: Thank you. Our next question comes from Michael Nathanson with MoffettNathanson. Your line is open. Michael Nathanson: Great, thanks. I have one for you, Sundar, and one for Philipp. Just a minute ago, Philipp spoke to the acceleration in streaming and smart TVs worldwide and the importance that YouTube has on the TV glass. I wanted to hear from you about your interest in supporting the smart TV ecosystem? And where do you see the opportunity for Google in terms of your product offerings to maybe improve consumer adoption of connected TVs? And then for you, Philipp, people have been asking about Search. But if you look at Search on a 2 year stack, the growth is the highest it has been years. And I wonder if you can disaggregate for us the growth between maybe new sort customers coming on the platform versus increased spending on an existing per customer basis? Anything you help us on kind of what drove it on a client-by-client basis on Search? Sundar Pichai: You know, on the first question on the smart TV ecosystem. Look, I mean, there is a shift to these becoming computing devices over time. They are going to be connected computing experiences. People who both consume content passively, actively, including gaming, over the top video and so on. So we view this as part of our platform shift. Android TV has made tremendous strides. It's a very customizable platform. We are working not only with TV providers globally, we are doing it with cable box manufacturers, as well as we supplement it with Google TV, with Chromecast as well. So it's a significant investment from our side, making sure we can drive that shift. And obviously, it has a lot of synergies for us in terms of being able to bring our services to our users, as well as give more opportunities for our Play developers to reach more users as well. But definite strong integration points with YouTube and YouTube TV as well. Philipp Schindler: Look, maybe rather than go into the deep dis-aggregation that you're talking about. Let me maybe talk a little about how we think about the overall market for Search. In the addressable market, in the last call - last quarter, I gave you a little bit of a breakdown here. But what is really important is we're not just addressing above the line marketing budgets, which is different metrics around, let's say, around $0.5 trillion which is traditional advertising, TV advertising and so on. There is also significant upside in below the line budgets overall, like promotional pricing, product within sponsorships and so on. And sure, we've seen COVID accelerate the shift to e-commerce at an astounding rate, but keep also in mind, 80% of commerce still remains offline. So there's a lot of room for digital to play a bigger role, and we think we can tap into other budgets that were traditionally used for, let's say, local advertising to drive sales. And as we think about our long runway for growth, we also think obviously about improving user and advertiser experiences for years to come here. And we're constantly asking ourselves how do we drive better answers to queries, including those with commercial intent. And how do we use our ML to deliver even more relevant and higher quality experiences for users. And our primary focus is really on delivering great experience for users and driving incremental value for our partners and making them successful. And I think as long as we do this, we should continue to see budgets move our way. Michael Nathanson: Okay. Thank you, both. Operator: Thank you. Our last question comes from Jason Bazinet with Citi. Your line is open. Jason Bazinet: Thanks. I just had one question, maybe it dovetails off of what you just said. But if I take your ad dollars this quarter, $50 billion in annualized, it's like $200 billion a year. Are you or the Board focused at all on trying to diversify away from the ad market? Or do you just feel like there's so much runway that there is no real reason to stay focused on non ad-based growth? Sundar Pichai: Look, at a high level, we - multiple parts to your question. Obviously, we are very focused on - we have a mission. We have an approach of being helpful across certain important attributes. And we do deep investments in computer science and AI to build services. And out of that, naturally, there is diversification over time. When you look at YouTube, is contributing to that. You look at Cloud, and within Cloud, we have both GCP and Workspace contributing to that. And longer term, we have efforts like Waymo as well. Beyond that, as both Philipp and Ruth have spoken about, with this digital shift, we see a lot of headroom in terms of where market for either advertising or e-commerce, and so we see a lot of headroom there as well. So we take a long-term view. We start from first principles to its focusing on both investing in deep technology and solving user problems. And out of that, I think you have a set of diversified models that emerged, both different types of businesses. And also within a business, for example, in YouTube, we have both ads and subscription over time. And so I think we'll continue approaching it that way with an eye for the long term. Jason Bazinet: Thank you. Operator: Thank you. And that concludes our question-and-answer session for today. I'd like to turn the conference back over to Jim Friedland for any further remarks. Jim Friedland: Thanks, everyone, for joining us today. We look forward to speaking with you again on our third quarter 2021 call. Thank you, and have a good evening. Operator: Thank you, everyone. This concludes today's conference call. Thank you for participating. You may now disconnect.
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Alphabet Shares Down 3% on Q1 Miss, YouTube Ad Revenue Growth Slows

Alphabet Inc. (NASDAQ:GOOG) shares closed more than 3% lower today following the company’s reported Q1 results, with EPS coming in at $24.62, missing the consensus of $25.96. Revenue of $68 billion came in slightly below the consensus estimate of $68.1 billion.

According to the analysts at Deutsche Bank, the most concerning part of the quarterly report was the dramatic year-over-year slowdown in YouTube advertising revenue growth. However, the analysts mentioned they believe many challenges are temporary, such as tough year-over-year comps, dilutive Shorts engagement, and slowing brand advertising spend, mostly in Europe.

Alphabet Shares Rose 8% Following Q4 Results

Alphabet Inc. (NASDAQ:GOOG) shares were trading more than 8% higher today afternoon following the company’s reported Q4 results, with EPS of $30.69 coming in better than the consensus estimate of $27.48. Revenue grew 32% year-over-year to $75.33 billion, beating the Street estimate of $72.13 billion. Net ad revenue rose 33% year-over-year, 5% better than the expectations.

Analysts at Oppenheimer increased their price target on the company’s shares to $3,560 from $3,500 following the results, noting that weaker YouTube outlook and reduction in estimates for AppStore was offset by higher Search and GCP estimates.

The company also announced a 20-1 stock split, effective July 1, which is expected to increase the retail demand.