Unboxing Revenue Growth Streak of Google and Microsoft

  • Oct 25, 2019 AEDT
  • Team Kalkine
Unboxing Revenue Growth Streak of Google and Microsoft
United States is the world's largest economy and holds some of the world’s largest stock exchanges, namely, NYSE and NASDAQ. Below mentioned stocks are among the most valued stocks on these stock exchanges.

Let’s unbox the earnings and financial and operational updates of these stocks.

Alphabet Inc. (NASDAQ: GOOG, GOOGL)

Incorporation of the world-renowned information giant Google took place in California in September 1998. Later in August 2003, Google underwent a re-incorporation process. In the year 2015, Alphabet became the successor issuer to Google through the implementation of a holding company reorganisation.

Alphabet announced results for its second quarter of 2019 (quarter ended 30 June 2019), reflecting improvements in core information products, momentum across Google’s businesses and innovation that is fuelling its growth.

Chief Financial Officer of Alphabet and Google, Ruth Porat said:

GOOG’s Revenue Growth of 19%

The following table gives a comparative view of Alphabet’s consolidated financial results for Q2 2019:

The above table can be read as follows:

  • Revenues of $38.9 billion, representing year over year growth of 19%. On a constant currency basis, revenue reported a 22% year over year increase;
  • Google segment revenues of $38.8 billion, up 19% year over year;
  • Other Bets revenues of $162 million with revenue growth of around 12% year over year;
  • Revenues from the United States, EMEA, APAC, and other Americas were reported at $17.9 billion, $12.4 billion, $6.6 billion, and $2.1 billion, respectively;
  • Cost of revenues was $17.3 billion, including TAC of $7.2 billion and other cost of revenues of $10.1 billion (TAC as a percentage of advertising revenues was 22%);
  • Operating expenses (excluding cost of revenues) were $12.5 billion;
  • Income from operations amounted to $9.2 billion;
  • Other income (expense), net, was recorded to be $3.0 billion;
  • Operating cash flow was noted at $12.6 billion;
  • Capital expenditures amounted to $6.1 billion.

Product Improvements by Google

During the quarter, Google’s fundamental product, Search, underwent a number of enhancements. In addition to this, Google also redesigned the mobile Search page and induced the Full Coverage feature to Search for improved organisation of news results. Google is currently working on the integration of augmented reality into its Search product.

Google also brought forward new additions to its Hardware product line by launching Pixel 3a and Pixel 3a XL. Google carries the potential to deliver its users a premium phone experience at a much lower price on the basis of its leading software competences.

Google believes that the demand for its home products is accelerating, along with the expansion of the company to fresh markets. The company gives the credit of such impressive performance to its ongoing strength in mobile search, including YouTube and Cloud.

Google CEO, Sundar Pichai says,

As per the company, the conference call to discuss the third quarter 2019 financial results of Alphabet is scheduled to be held on 28 October 2019.

Let us now talk about another global trend-setter organisation.

Microsoft Corp. (NASDAQ: MSFT)

As a leading developer of software systems and applications, Microsoft Corp. (NASDAQ: MSFT) strives to propel every individual and every organisation of the world to achieve more through its innovation.

MSFT Revenue Increased by 14%

Microsoft recently released its quarterly earnings report for Q1 FY20 (quarter ended 30 September 2019). The highlights from Microsoft’s earnings report are:

  • Revenue amounted to $33.1 billion and increased 14% as compared to the corresponding period of last fiscal year;
  • Operating income was noted at $12.7 billion and increased 27% as compared to pcp;
  • Net income totalled to $10.7 billion and increased 21% as compared to the corresponding period of last fiscal year;
  • Diluted earnings per share was recorded to be $1.38 and increased 21% as compared to the corresponding period of last fiscal year;

The chief executive officer of Microsoft, Satya Nadella said

During the quarter, Microsoft paid dividends and repurchased shares, amounting to $7.9 billion. The amount reflects an increase of 28% as compared to the previous corresponding period.

Executive Vice President and Chief Financial Officer of Microsoft, Amy Hood said

LinkedIn Revenue Increased by 25%

Talking about revenue reported by Microsoft’s verticals, revenue in productivity and business processes amounted to $11.1 billion and increased by 13%, including the following business highlights:

  • Office commercial products and cloud services revenue went up by 3%, driven by Office 365 Commercial revenue growth of 25%
  • Office consumer products and cloud services revenue increased by 5%, with continued growth in Office 365 Consumer subscribers to 35.6 million
  • LinkedIn revenue increased by 25%
  • Dynamics products and cloud services revenue increased by 14%, driven by Dynamics 365 revenue growth of 41%

Next, revenue in Intelligent Cloud amounted to $10.8 billion and increased by 27%, including the following business highlights:

  • Server products and cloud services revenue increased by 30%, driven by Azure revenue growth of 59%
  • Enterprise Services revenue increased by 7%

Lastly, revenue in More Personal Computing amounted to $11.1 billion and increased 4%, with the following business highlights:

  • Windows OEM revenue increased by 9%
  • Windows Commercial products and cloud services revenue went up by 26%
  • Search advertising revenue excluding traffic acquisition costs grew by 11%
  • Xbox content and services revenue was relatively unchanged
  • Surface revenue decreased by 4%

Microsoft looks forward to an intensely competitive market, which could impact its revenues and operating margins. Also, Microsoft looks forward to putting greater focus on its cloud-based services.


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