Business Magazine

Google Misses On Revenue & Earnings; Shares Sink As Much As $50 After Hours

Posted on the 21 April 2016 by Worldwide @thedomains

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


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