Google (NASDAQ:GOOG) share price climbs on blockbuster earnings

YouTube’s fast-growing revenue helps Google smash earnings estimates…

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The share price of Google-parent Alphabet Inc (NASDAQ: GOOG) climbed higher in after-hours trade following the release of its second-quarter results.

At the time of writing, shares in the US tech giant are valued at US$2,735.93 apiece. Over the past 12 months, the Google share price has gained 82%. The company now holds a market capitalisation of US$1.8 trillion.

On that note, let’s dive deeper into the company’s latest results.

YouTube is the star of the show

Reporting after the US market closed last night, Google stunned analysts with its drastic growth in the second quarter.

The tech giant’s revenue and earnings per share knocked it out of the park. On the top line, Google reported US$61.88 billion in revenue versus estimates of US$56.16 billion. Meanwhile, earnings per share decimated estimates – coming to US$27.26 per share versus US$19.34 estimates.

While Google Search remains the company’s leading source of revenue, YouTube is the fastest-growing. According to the release, search revenue increased 68% year-over-year (YoY) to US$35.85 billion, whereas YouTube ads jumped 84% YoY to US$7 billion.

Google’s Chief Business Officer Philipp Schindler discussed YouTube’s performance on the earnings call.

YouTube is helping advertisers reach audiences they can’t find anywhere else. According to Nielsen’s Total Ad Ratings reach reporting, from Q4 18 to Q4 20 on average 70% of YouTube’s reach was delivered to an audience not reached by the advertisers in TV and media.

The company made no secret that its numbers have benefitted from the increased online activity, likely a result of the pandemic.

Our strong second-quarter revenues of $61.9 billion reflect elevated consumer online activity and broad-based strength in advertiser spend. Again, we benefited from excellent execution across the board by our teams.

Google Chief Financial Officer, Ruth Porat

Streaming comparison and Google share price snapshot

Investors might be interested to know that Google’s YouTube Ads revenue is hot on the tail of Netflix Inc (NASDAQ: NFLX)’s quarterly revenue. Netflix reported US$7.342 billion in revenue for the latest quarter, roughly US$300 million more than YouTube Ads.

However, Google’s “other revenues” of US$6.6 billion include YouTube’s non-ad revenue. That would include YouTube Premium — its monthly subscription service. Although, it is hard to tell how much of that revenue would be derived from the premium service itself.

Lastly, the US tech giant is valued on a price-to-earnings (P/E) ratio of 34.6 times. For comparison, Netflix trades on a 53.8 P/E multiple.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), and Netflix. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Netflix. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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