Alphabet Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended March 31, 2016 and missed earnings and revenue forecasts sending shares down in after hours trading by $50.
Shares are currently down over 6% and have been bouncing down between $40 and $50 a share
Q1 2016 financial highlights
The following summarizes our consolidated financial results for the quarters ended March 31, 2015 and 2016 (in millions, except for per share information; unaudited):
Three Months Ended
March 31, 2015
Three Months Ended
March 31, 2016
Revenues $17,258 $20,257
Increase in revenues year over year 12 % 17 %
Increase in constant currency revenues year over year 17 % 23 %
GAAP operating income $4,447 $5,342
GAAP operating margin 26 % 26 %
Non-GAAP operating income $5,650 $6,836
Non-GAAP operating margin 33 % 34 %
GAAP net income $3,515 $4,207
Non-GAAP net income $4,461 $5,248
GAAP diluted EPS for Class A and B common stock and Class C capital stock $5.10 $6.02
Non-GAAP diluted EPS for Class A and B common stock and Class C capital stock $6.47 $7.50
Diluted shares (in thousands) 689,498 699,311
The following summarizes our segment results where Google is presented as a single segment and all other Alphabet businesses are combined as Other Bets (in millions; unaudited):
Three Months Ended
March 31, 2015
Three Months Ended
March 31, 2016
Google segment revenues $17,178 $20,091
Google operating income $5,188 $6,272
Other Bets revenues $80 $166
Other Bets operating loss ($633) ($802)
Q1 2016 consolidated financial summary
Revenues (in millions; unaudited):
Three Months Ended
March 31, 2016
Change from Q1 2015 to Q1 2016 (YoY)
Change from Q4 2015 to Q1 2016 (QoQ)
Revenues $20,257 17% (5)%
Constant currency revenues (YoY) $20,850 23% N/A
Constant currency revenues (QoQ) $20,238 N/A (4)%
Our revenues and constant currency revenues are reconciled in the financial tables following this release.
Costs and expenses
Cost of revenues, operating expenses, SBC expense, and depreciation, amortization, and impairment charges (in millions; unaudited):
Three Months Ended
March 31, 2015
Three Months Ended
March 31, 2016
Cost of revenues $6,356 $7,648
Cost of revenues as % of revenues 37 % 38 %
Operating expenses (other than cost of revenues) $6,455 $7,267
Operating expenses as % of revenues 37 % 36 %
SBC expense* $1,203 $1,494
SBC related tax benefits $(257) $(453)
Depreciation, amortization, and impairment charges $1,177 $1,371
*Excludes the expense for awards accounted for as stock-based compensation that will ultimately settle in cash.
Supplemental information (in millions, except for headcount data; unaudited)
Three Months Ended
March 31, 2015
Three Months Ended
March 31, 2016
Cash, cash equivalents, and marketable securities $65,436 $75,264
Net cash provided by operating activities* $6,722 $7,658
Capital expenditures $2,927 $2,428
Free cash flow* $3,795 $5,230
Effective tax rate (ETR)* 24 % 18 %
Headcount 55,419 64,115
Q1 2016 Google segment summary
Revenues and monetization
Google segment revenues by source (in millions; unaudited):
Three Months Ended
March 31, 2015
Three Months Ended
March 31, 2016
Change from Q1 2015 to Q1 2016 (YoY)
Google segment
Google websites $11,932 $14,328 20%
Google Network Members’ websites 3,576 3,692 3%
Google advertising revenues 15,508 18,020 16%
Google other revenues 1,670 2,071 24%
Google segment revenues $17,178 $20,091 17%
Paid clicks and cost-per-click information (unaudited):
Change from Q1 2015 to Q1 2016 (YoY) Change from Q4 2015 to Q1 2016 (QoQ)
Aggregate paid clicks 29 % (3)%
Paid clicks on Google websites 38 % (4)%
Paid clicks on Google Network Members’ websites 2 % 4 %
Aggregate cost-per-click (9)% 0 %
Cost-per-click on Google websites (12)% 2 %
Cost-per-click on Google Network Members’ websites (8)% (12)%
Traffic acquisition costs (TAC) and operating income
TAC to Google Network Members and distribution partners, operating income, and SBC expense (in millions; unaudited):
Three Months Ended
March 31, 2015
Three Months Ended
March 31, 2016
TAC to Google Network Members $2,432 $2,571
TAC to Google Network Members as % of Google Network Members’ revenues 68 % 70 %
TAC to distribution partners $913 $1,217
TAC to distribution partners as % of Google website revenues 8 % 8 %
Total TAC $3,345 $3,788
Total TAC as % of Google advertising revenues 22 % 21 %
Three Months Ended March 31, 2015 Three Months Ended March 31, 2016
Operating income, excluding SBC expense $6,243 $7,588
SBC expense $1,055 $1,316
Operating income $5,188 $6,272
Supplemental information (in millions; unaudited)
Three Months Ended
March 31, 2015
Three Months Ended
March 31, 2016
Capital expenditures $2,678 $2,036
Depreciation, amortization, and impairment $1,137 $1,317
Q1 2016 Other Bets summary
Revenues and operating results
Other Bets revenues, operating loss, and SBC expense (in millions; unaudited):
Three Months Ended
March 31, 2015
Three Months Ended
March 31, 2016
Other Bets revenues $80 $166
Operating loss, excluding SBC expense $(516) $(657)
SBC expense $117 $145
Operating loss $(633) $(802)
Supplemental information (in millions; unaudited)
Three Months Ended
March 31, 2015
Three Months Ended
March 31, 2016
Capital expenditures $157 $280
Depreciation, amortization, and impairment $40 $54
