Both Alphabet and Amazon shattered Wall Street expectations last night after reporting their second quarter earnings.
The April to June period saw Alphabet’s revenue grow by 21.3 per cent to $21.5 billion – representing an increase of $3.8 billion from the same quarter last year. Net income has grown to $4.8 billion, with Google’s earnings per share of $8.42 exceeding analysts’ expectations, who had the value at around $8.03 each.
According to Alphabet CFO Ruth Porat, this increased revenue is as result of greater ad exposure for users who are increasingly leaning towards mobile.
Many have questioned Alphabet’s foray into the mobile ad space, with reported declines in the net value of its ads becoming a cause for concern for its investors. These latest results will cast aside many doubts that Alphabet cannot successfully translate its desktop dominance over to mobile.
This growth will give the company some confidence that it can compete with Facebook. Though it’s not growing at quite as fast a rate as the social media giant – which now has a big hand in the mobile ad industry – Google’s success in the video ad market is helping with the transition to mobile and contributing to Alphabet’s growing quarterly profit.
For Google CEO Sundar Pichai, mobile is the key area of focus for the company, and he believes continued developments in Alphabet’s machine learning systems will help this area grow even further. “Through investment in AI, we are investing in our future,” he said.
Amazon Web Services wins the day
Meanwhile, Amazon defied expectations in similar fashion with revenue for the quarter up 31 per cent from the same quarter last year, coming in at $30.4 billion, with earnings per share at $1.78 – $0.67 more than predicted.
CEO Jeff Bezos said in a statement: “It’s been a busy few months for Amazon around the world, and particularly in India.”
For Amazon, much of its growth has come from Amazon Web Services, the company’s cloud division that powers many websites, including Netflix and Airbnb.
Although this area of the business is bringing in less revenue compared to the company’s huge North American retail arm, $2.89 billion versus $17.67 billion, it’s now making more profit.
Amazon’s online and delivery service Prime has also seen significant growth following a number of years being unprofitable.
Second quarter successes highlight a move by both of these huge players towards longer-term enterprise solutions, in order to help them cope with consumer market changes, as well as continued moves to mobile.
With similar growth forecast for the next quarter, everyone will be paying close attention to Alphabet and Amazon’s next moves.