Alphabet has just announced its earnings for the third quarter of the year, following Wall Street's closing bell. It did post monster numbers once again, as expected, but it did miss on revenue for the quarter. It posted $33.7 billion of revenue in the quarter, versus the $34.04 billion expected by analysts. When it comes to earnings per share, it beat analysts expectations by a big margin. Posting $13.06 EPS, versus the estimate of $10.42. Alphabet's revenues were still up 21-percent year-over-year, despite missing out on analysts expectations. As is the case every quarter for Alphabet, the advertising arm accounted fro the most of its revenue, with $28.95 billion during the third quarter. That's nearly 87-percent of Alphabet's overall revenue. This means that Alphabet is diversifying its revenue streams a bit though, seeing as in the past few years, advertising made up more than 95-percent of its revenue.
For Alphabet, its operating income came in at about $8.3 billion for the quarter, and that's an operating margin of 25-percent. Net income was $9.1 billion, up from $6.7 billion in the same period a year ago. Diluted EPS was $13.06, and Diluted shares are 703 million. This puts Google in the nine-percent tax bracket, that's down from the 16-percent it was in a year ago. That is due to the tax break that President Trump signed into law last December. Breaking the revenues down further, Google's properties revenues were $24 billion for the quarter. Google Network Members' properties revenues came in at $4.9 billion. While advertising was $28.9 billion, other revenues were $4.6 billion. Other bets came in at $146 million, which is up from the $117 million in the same period a year ago. Google's Other Bets are starting to bring in more money for the company, which includes many of the projects that have graduated from X like Waymo.
Currently, Alphabet has around $13.4 billion in cash and cash equivalents right now. About $93 billion in marketable securities. Non-marketable investments sit at $12.6 billion. Long-term debt for Alphabet sits at $3.9 billion, which is slightly higher than what it was at the end of the last fiscal year (ending December 31, 2017). And there is roughly $7.9 billion in free cash flow for Alphabet right now. Google also has about 94,372 employees right now, which is up quite a bit from the 78,101 from the end of the third quarter in 2017.
Background: Every single quarter, Alphabet posts some pretty large numbers in terms of both revenue and profit. It is a bit surprising to see Alphabet miss on analyst expectations for the quarter, but it did still post a 21-percent increase compared to last year, which is nothing to sneeze at, especially for Alphabet. It is a bit interesting to see that its ad revenue has dropped below 90-percent of its entire revenue for the quarter. Seeing as that is Alphabet's biggest business, and the one that it will take seemingly less chances on, as it doesn't want to lose its cash cow. But in recent years, Alphabet has been looking for other revenue streams to diversify it a bit more, and find other ways to bring in money. Seeing as there isn't much more room for Alphabet to grow in terms of advertising right now, but there is room for it to grow in other areas. This is partly what the X lab is for. It houses all of Alphabet's "projects" and once they are ready to operate as their own business and make some money, it graduates and becomes it's own company under the Alphabet umbrella. It works well for Alphabet, and fits in with what companies do in Silicon Valley, without being overly pushy about getting products out the door, and waiting for them to mature a bit.
Impact: The immediate impact from these results is on Google's share price. In after hours trading, it dropped about three-percent when the press release came out with its earnings. Currently, at the time of writing this, it has jumped up four and a half-percent from its closing price. This is likely due to the guidance that Alphabet is giving on the call. Or it could simply be from investors realizing that yes, Alphabet missed on revenue, but it still raked in $33 billion in revenue for the quarter, that's up over 20-percent from a year ago. Google doesn't yet do a dividend for its investors, but with its share price up over $1,000, it may start a dividend pretty soon. Though, Amazon's price did pass $2,000 earlier this year. All this means is that less people can afford to buy stock in these companies, since you need a grand to get a single share of Alphabet. But a company as big as Alphabet, can really turn the market for the worse or the better. With the market having such an up and down few weeks lately, this could help stabilize the stock market tomorrow and help it go back up. It's been in a pretty big down-turn, and in fact, yesterday, the stock market lost all of its gains for 2018, which is pretty incredible, considering we are sitting at the end of October with just two months left of 2018. With both Alphabet and Amazon beating today, the market could see a huge upswing tomorrow.
Alphabet is still expecting to put out some pretty large numbers for the end of the year. After all, people actually use Google search and maps a lot more in the last quarter, due to all of the holiday shopping and traveling out there. Which also means seeing more ads. Not to mention, buying more Google hardware like the newly announced Pixel 3, Pixel Slate and Google Home Hub that the company announced earlier this month in New York City. So the fourth quarter is likely going to be a pretty big one for Alphabet, and for the entire year so far, it is already pushing $97 billion in revenue (which is nearly $20 billion more than this time last year), and net income is around $21 billion for the company. When it announces Q4 and full-year financials in about three months (around late January usually), it should be a blockbuster earnings and really push its stock price even higher.