Alphabet Inc. Q3 FY2021 Earnings Call

· Earnings call transcript and AI-powered summary

Quarter Overview

  • Alphabet reported Q3 2021 revenue of $65.1 billion, up 41% year-over-year (39% in constant currency). This compares to 62% growth in Q2 2021, reflecting tougher year-over-year comps as pandemic-driven digital surges began mid-2020.
  • Operating income rose 88% year-over-year to $21 billion, with an operating margin of 32% (versus 24% in Q3 2020), aided partly by depreciation schedule changes introduced earlier in 2021.
  • Net income reached $18.9 billion.
  • Free cash flow was $18.7 billion in the quarter; $65.7 billion over the trailing 12 months.
  • Alphabet ended the quarter with $142 billion in cash and marketable securities.

Google Services Highlights

  • Google Services revenue: $59.9 billion, up 41% year-over-year.
  • Search & Other Ads revenue grew 44% to $37.9 billion, driven primarily by retail—once again the largest contributor.
  • YouTube advertising revenue rose 43% to $7.2 billion, slightly slower growth than Q2 as it lapped a strong brand recovery in Q3 2020.
  • Network advertising revenue grew 40% to $8 billion.
  • Other revenues (hardware, YouTube subscriptions, and Play): $6.8 billion, up 23%. Hardware benefited from Fitbit inclusion.
  • Google Services operating income: $24 billion, up 66%, with a 40% margin.

Google Cloud

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Operator: Welcome, everyone, and thank you for standing by for the Alphabet Q3 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I'd now like to hand the conference over to your speaker today, Jim Friedland, Director of Investor Relations. Please go ahead. Jim Friedland: Thank you. Good afternoon, everyone, and welcome to Alphabet's Third Quarter 2021 Earnings Conference Call. With us today are Sundar Pichai, Philipp Schindler, and Ruth Porat. Now, I'll quickly cover the safe harbor. Some of the statements that we make today regarding our business operations and financial performance, including the effect of the COVID-19 pandemic on those areas, may be considered forward-looking, and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. For more information, please refer to the risk factors discussed in our most recent Forms 10-K and 10-Q filed with the SEC. During this call, we'll present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP GAAP measures is included in today's earnings press release, which is distributed and available to the public through our Investor Relations website located at abc.xyz/investor. Now, I'll turn the call over to Sundar. Sundar Pichai: Thank you, Jim, and good afternoon, everyone. In 2016, I laid out our vision to become an AI-f

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