In its second quarter 2021 earnings report last week, Alphabet, parent of Google, reported total revenue of $61.9 billion, a 62% increase compared to the second quarter of 2020. Google advertising1 represented the majority of that revenue at $50.4 billion, including $35.8 billion from Google search and other, $7.0 billion from YouTube ads, and $7.6 billion from Google network. The balance of revenue came from Google other at $6.6 billion2, Google Cloud at $4.63, and other bets and gains/losses of $186 million.
“We saw a rising tide of online consumer and business activity. We’re proud that our services helped so many businesses and partners. In fact, we set a number of records this quarter,” said Sundar Pichai, CEO of Alphabet and Google, on the July 27, 2021 earnings call. “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 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.”
Quarterly financial highlights
Other financial highlights during the second quarter 2021include the following:
- Operating income was $19.4 billion, compared to $6.4 billion in Q2 2020.
- Operating margin was 41%, compared to 17% in the second quarter of 2020.
- Net income for the quarter was $18.5 billion, or $27.26 diluted earnings per share, compared to $7.0 billion, or $10.13 diluted earnings per share, in the second quarter of 2020.
- Total acquisition costs were $10.9 billion, compared to $6.7 billion in the second quarter of 2020.
- Year-to-date total revenue was $117.2 billion, compared to $79.5 billion in the second quarter of 2020.
- As of June 30, 2021, the company had $135.9 billion in total cash, cash equivalents and marketable securities.
- Google Workspace shows strong growth as companies adapt and collaborate in work-from-home, remote and hybrid environments.
- YouTube Shorts, which launched in India last fall and more broadly this spring, is gaining momentum. It is now available in more than 100 countries, and it has surpassed 15 billion daily views.
- YouTube is pleased with the progress of its subscription products including Music, Premium and YouTube TV.
Alphabet did not give a lot of specifics for its third quarter outlook on the earnings call, but it did say that it was to early to predict long-term trends, particularly with the resurgence of COVID with the global spread of the delta variant. The company expects to hire recent graduates during the third quarter, and they’ll spend more on sales and marketing. In addition, they predict revenue growth in Google Cloud.
1,2Combined, Google advertising and Google other totaled $57.1 billion. These Google services include products and services including ads, Android, Chrome, hardware, Google Maps, Google Play, Search and YouTube. The revenue is generated primarily from advertising, app sales, in-app purchases, digital content products and hardware, and fees from subscription-based products including YouTube Premium and YouTube TV.
3Google Cloud includes Google’s infrastructure and data analytics platforms, collaboration tools and other services for enterprise customers. Google Cloud generates revenue primarily from fees received for Google Cloud Platform services and Google Workspace collaboration tools.
Like Microsoft and Apple, Alphabet and its better known subsidiary Google have adapted to meet the changing needs of consumers and businesses. The pandemic created an opportunity for them to shine – to match consumers with needed products and services and to support businesses as they evolved to meet the demands of their customers. With the evolution of YouTube and its expanding product line, and the continued dominance of Google advertising and search, Google will continue to be successful, though it will be hard to keep up the growth the company saw in the second quarter. The pending antitrust investigations and litigation in the Europe and the U.S. will not make a big dent in Alphabet’s bottom line, but they could make a difference if Alphabet is required to do business differently.