Tech giant Alphabet (GOOGL) recently released its second quarter results, reporting $70 billion in revenues, up 13% YoY, compared to $62 billion a year ago, notes Todd Shaver, editor of Bull Market Report.
The company posted a profit of $16 billion, or $1.21 per share, against $18 billion, or $1.36 per share during the year-ago period. The stock rose after the earnings report, despite missing estimates and posting its slowest pace of growth in years.
This was in stark contrast to the 62% YoY growth posted during the same period last year, when the company was aided by substantial tailwinds arising from the post-pandemic reopening of the global economy. Alphabet experienced a slowdown across the board during the quarter with businesses reigning in advertising dollars in anticipation of a painful recession in the coming months.
Total advertising revenues stood at $56 billion, up 12% YoY, with the most noteworthy deceleration seen at YouTube Advertising, with a growth of 5% during the quarter, at $7.3 billion, compared to a 84% YoY growth rate during the same period last year. Google Cloud, however, outpaced other segments, posting $4.6 billion in revenues, up 35% YoY, compared to $6.3 billion a year ago.
YouTube continues to face stiff competition from the likes of TikTok and Instagram, for both eyeballs and advertising dollars. The search advertising segment, however, remains robust, and has historically been immune to slowdowns, given its superior targeting capabilities and returns on investment. This made it the only segment to top estimates during the quarter, posting $41 billion in revenues, up 15% YoY.
Following a drop of nearly 28% YTD, and over 30% since its peak in November, the stock trades at an attractive valuation of just 5 times sales and approximately 18 times earnings. This, along with the company’s aggressive stock buybacks, should cushion the stock against any substantial downward moves no matter how the markets or the economy performs in the coming months.
Alphabet continued to return capital to shareholders with $15 billion in buybacks during the quarter, providing substantial support to the stock in the midst of the broad-based carnage in the market. With $125 billion in cash, just $26 billion in debt, and over $95 billion in cash flow, the company can continue this streak of buybacks, all the while weathering any and all storms that come its way.
Yes, we realize that Big Tech is under pressure in the markets. But we also understand that these companies are very profitable and have a ton of cash on the balance sheet. We stand by Google no matter what type of quarter they had. We look for the next five years; not the last three months.
