GOOG Q3 2021 Earnings

Call Details

• Call Title: Alphabet Inc. Q3 2021 Earnings Call
• Date: October 26, 2021 at 8:30 PM UTC
• Management Team:
  • Sundar Pichai (Chief Executive Officer)
  • Philipp Schindler (Chief Business Officer)
  • Ruth Porat (Chief Financial Officer)
  • Jim Friedland (Senior Director of Investor Relations)

Call Summary

Financial Performance

• Consolidated revenues were $65.1B, up 41% year-over-year and up 39% in constant currency.
• Total cost of revenues was $27.6B, up 31% year-over-year, with traffic acquisition costs (TAC) of $11.5B, up 41%.
• Operating expenses were $16.5B, up 19% year-over-year, driven by headcount growth and a ramp in ads and promotions versus the prior-year quarter.
• Operating income was $21.0B, up 88% year-over-year, resulting in an operating margin of 32%.
• Net income for the quarter was $18.9B and free cash flow was $18.7B for the quarter and $65.7B on a trailing 12-month basis.
• Google services revenues were $59.9B, up 41% year-over-year, including Search & other advertising of $37.9B up 44%, YouTube advertising of $7.2B up 43%, and Network advertising of $8.0B up 40%.
• Google Cloud revenues were $5.0B, up 45% year-over-year, and Google Cloud reported an operating loss of $644M for the quarter.
• Other Bets reported revenues of $182M and an operating loss of $1.3B for the quarter.

Guidance

• Based on current spot rates, FX is expected to have virtually no impact on reported revenues in Q4, versus a 1.5% tailwind in Q3 and a 4% tailwind in Q2.
• The benefit from lapping weaker performance in the comparable period last year diminished in Q3 and is expected to diminish further in Q4.
• Sales and marketing expenses are expected to be elevated in Q4 to support the holiday selling season.
• Headcount grew by nearly 6,000 in Q3 including seasonal hires, and the company expects robust headcount growth in Q4 for Google services and Google Cloud.
• The gross margin and operating margin benefit from the change in useful lives (depreciation) was present in Q3 but will be lower in Q4.
• Google Cloud remains focused on revenue growth while continuing aggressive investment in go-to-market and product teams.
• Play Store fee changes that impacted engagement earlier are noted, and a further fee reduction announced will take effect in January 2022.