GOOG Q3 2019 Earnings

Call Details

• Call Title: Alphabet Inc. Q3 2019 Earnings Call
• Date: October 28, 2019 at 9:00 PM UTC
• Management Team:
  • Ellen West (Head of Investor Relations)
  • Sundar Pichai (CEO)
  • Ruth Porat (Chief Financial Officer)

Call Summary

Financial Performance

• Total consolidated revenues were $40.5B, up 20% year-on-year and up 22% in constant currency.
• Google segment revenues were $40.3B, up 20% year-on-year, with Google Sites at $28.6B up 19%, Network revenues at $5.3B up 8%, and Other revenues at $6.4B up 39%.
• Total traffic acquisition costs (TAC) were $7.5B or 22% of total advertising revenues, and TAC was up 14% year-on-year.
• Consolidated operating income was $9.2B, up 6% year-on-year, for an operating margin of 23%, while Google operating income was $10.9B, up 14% year-on-year, with a Google operating margin of 26.9%.
• Net income was $7.1B and diluted earnings per share were $10.12 for the quarter.
• Operating cash flow was $15.5B and free cash flow was $8.7B for the quarter.
• Cash CapEx for the quarter was $6.7B and cash and marketable securities ended the quarter at approximately $121B.
• Other income and expense reflected a loss of $549M driven primarily by unrealized losses in marketable equity securities, with an unrealized equity gain of $5.8B in combined portfolios as of September 30.

Guidance

• Foreign exchange headwinds are expected to continue into Q4 2019 and will affect both revenues and operating income.
• Quarter-to-quarter variability in year-over-year revenue growth is a stated operating characteristic and the company emphasizes long-term management over quarterly optimization.
• Headcount growth in Q3 was unusually high on an absolute basis due to new college hires, and 2019 headcount growth is expected to be in line with 2018 on pace.
• Capital expenditure expectations are primarily driven by compute requirements to support machine learning, cloud, search, and YouTube.
• Sales and marketing expenses are seasonally higher in the back half of the year and are expected to be particularly elevated in Q4 to support the holiday season.
• No explicit numeric revenue or margin guidance was provided for Q4 on the call.