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Alphabet Scores Big In Q1, But "Other Bets" Are Still A Tiny Fraction Of The Company

The company’s stock is down 5.64% in after-hours trading.

Alphabet Scores Big In Q1, But "Other Bets" Are Still A Tiny Fraction Of The Company
[Photo: Solodovnik via Shutterstock]

Alphabet had a very strong first quarter, posting revenues of $20.28 billion, up 17% year-over-year—but Wall Street wasn’t happy that the tech giant missed earnings estimates. The company’s stock is down 5.64% in after-hours trading.

As in the fourth quarter, Alphabet broke out its earnings by segment: its core Google business–search, YouTube, maps, ads, Android, Chrome, and Google Play, as well as hardware like Chromecast and Chromebooks Nexus, VR products like Cardboard, and "other bets." As before, Google accounted for the vast majority of Alphabet's revenues: 99.18% in total.

Unlike after its Q4 earnings report, Alphabet did not topple Apple as the world’s most valuable company.

During the company’s earnings call today, chief financial officer Ruth Porat said that Alphabet’s "primary driver" during Q1 was mobile search by consumers. At the same time, YouTube revenues are growing substantially, she said, indicating how millions upon millions of users are interacting with Google’s properties every day.

Google CEO Sundar PichaiPhoto: Flickr User Nguyen Hung Vu]

Google CEO Sundar Pichai was quick to cite YouTube’s global strength, noting that the video service has more users among 18-34-year olds and 18-49-year olds than any TV network. He also mentioned that YouTube announced earlier this week that it is now making live 360-degree streaming video available globally, with this weekend’s Coachella festival being a launch event for the service.

Notwithstanding investors’ instant displeasure with the size of Alphabet’s revenue growth, the company is still growing dramatically. Porat said its current headcount is 64,115, up 2,300 from a quarter earlier. The lion’s share of those new hires are engineers and product managers in Alphabet’s key growth areas—cloud and apps.

Alphabet’s other bets segment brought in just $166 million during Q1, with most of that revenue coming from Nest, Verily, and Google Fiber. Porat cautioned investors that "there is likely to be lumpiness in the reported [other bets] results from quarter to quarter," and that they should evaluate that part of the larger company over the longer term rather than on a quarterly basis.

For his part, Pichai said artificial intelligence will be a big part of Alphabet’s push toward making Google more useful over time. He cited new features in Google Calendar that help users schedule things like meeting fitness goals and that, over time, AI will be a big part of helping with things like cancer diagnoses and climate forecasts.

Finally, in what was by far the most personal part of the earnings call, Pichai added that people throughout Alphabet—up to and including the company’s senior leadership—wanted to pay their respects to Bill Campbell, the longtime mentor to many throughout Silicon Valley. Campbell, who died this week, spent "endless hours" with Google’s leaders, helped build the company's board of directors, "made us all smile, and inspired many leaders in the Valley."

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