Alphabet reports 13% rise in Q1 2020 revenue despite slowdown in ad business

Alphabet, the parent company of search engine giant Google, reported a revenue of $41.2 billion and net income of $6.8 billion for the first quarter of 2020 compared to its Q1 2019 when it posted a revenue of $36.3 billion and a net income of $8.3 billion.

Earnings per share also dropped from $11.90 in Q1 2019 to $9.87 in Q1 2020.   

Despite a sharp slowdown of advertisement sales in March, Alphabet’s Q1 2020 revenue grew by 13% as compared to its previous year.  Ruth Porat, CFO of the company, cautioned that the quarter had ended on a low note due to the Covid-19 pandemic. 

Google raked in 82% or $33.8 billion in revenue from its ad sales alone during the quarter.

Also read: Google India reports 56% decline in FY19 revenues

“As of today, we anticipate that the second quarter will be a difficult one for our advertising business,” she added.

YouTube, the company’s video hosting service, bought in advertisement revenues of $4.04 billion, which is a 33% jump from $3.03 billion in the first quarter of 2019.

Google also took a hit to its profits after it incurred a $1.7 billion fine in Europe for alleged unfair online advertising practice. Google was fined the amount in Mid-March by the European Union on allegations that the company was involved in illegal practices in search advertising brokering from 2006 to 2016.

CEO Sundar Pichai said that two aspects of the company give hope for the future. First is how the Google search feature can be easily turned on or off “and marketers see it as highly cost effective and ROI (return on investment) based,” Pichai said during an earnings call.

“Second, our business is more diversified than it was in 2008,” he added, pointing out towards the growth in cloud-based revenues, which had grown by 52% year-on-year.

The revenue for its cloud business was at $2.8 billion, including numbers from Google Cloud Platform and G Suite. For Q1 of 2019, the Cloud revenues were at $1.83 billion.

The company has also seen drastic rise in the number of people using video conferencing app Google Meet.

Read: Google integrates video conferencing platform Meet with Gmail

During the earnings call, Pichai said that the company is adding roughly 3 million users each day on the video conferencing app and that it has seen a 30-fold increase in usage since January. 

“There are now over 100 million daily Meet meeting participants,” he said.

The company has increased its employee count by 19% to more than 123,000 in the first quarter of 2020 and is expected to have a slower hiring rate this year.