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Google parent company Alphabet sees its first revenue decline in history

Google parent company Alphabet sees its first revenue decline in history


Search revenue dropped more than $2 billion from last year

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Illustration by Alex Castro / The Verge

Google parent company Alphabet warned in last quarter that it was expecting to see the impact of coronavirus in the second quarter results, and it did: the company saw its first revenue decline in its history. But it managed to beat Wall Street’s revenue expectations.

Total revenue for the quarter was $38.3 billion, versus the $37.4 billion expected, but that marks a 2 percent decline from the second quarter of 2019. Net income dropped to $6.9 billion, from $9.9 billion a year ago,. Revenue for Search was $21.3 billion, down from $23.6 billion.

“We continue to navigate through a difficult global environment,” CFO Ruth Porat said in a statement announcing the earnings.

One bright spot was YouTube, where advertising revenue rose to $3.81 billion, from $3.6 billion last year. Google’s Cloud division saw rising revenue as well, to $3.01 billion from $2.1 billion in the year ago quarter.

During a call with analysts, Porat said she was “cautiously encouraged” by the company’s growth near the end of the quarter, which ended June 30th, but added “we believe it its premature to gauge the durability of recent trends given the obvious uncertainty of the global macro environment.”

CEO Sundar Pichai said on the call that while the economic climate remained fragile due to the coronavirus pandemic, “we saw the early signs of stabilization as users returned to commercial activity online.”

Pichai said YouTube and Google Play subscriptions saw “good traction” in the quarter, with app and game downloads rising 35 percent. It added some large customers to its Cloud segment, including Deutsche Bank, Pichai added, and Cloud also benefited from the number of people working from home during the pandemic. “Customers are choosing Google Cloud to either lower their costs by improving operating efficiency or to drive innovation,” he said.

Revenue for Alphabet’s Other Bets category — which includes its experimental X lab, Waymo self-driving subsidiary, and a number of other divisions like its Verily life sciences unit was down, to $148 million from $162 million a year ago. Other Bets saw an operating loss of $1.12 billion.

Google “other revenues,” which includes its hardware, Play Store, and non-advertising YouTube revenues — reported $5.12 billion, up from $4 billion.

Asked about the anti trust investigations into Google’s search and Android businesses, Pichai said the company would “adapt,” adding, “I think the scrutiny is going to be here for a while.”

Alphabet was one of four tech giants reporting quarterly earnings on Thursday, and the only one whose results showed a decline from the year-ago quarter. Its stock rose slightly in after-hours trading Thursday.