Alphabet Outperforms in Q3, Google Cloud & YouTube Ad Revenue Falter

The Q3 2021 results of Alphabet Inc. (GOOGL), the parent company of Google, have exceeded the Street’s expectations on both revenue and earnings fronts. Markedly, higher advertising revenue, elevated consumer online activity and strong contributions from Google Cloud drove total revenues.

However, shares of the company slipped almost 1% in the extended trading session on Tuesday as both YouTube ad revenue and Google Cloud sales fell short of analysts’ expectations.

Earnings per share during the quarter rose 70.7% year-over-year to $27.99 and surpassed the Street’s estimate of $23.47 per share. Adjusted revenue surged 39% year-over-year to $65.12 billion and topped analysts’ expectations of $63.45 billion.

Similarly, Google advertising revenue jumped 43.2% year-over-year to $53.13 billion in Q3. Additionally, Google Cloud reported 45% year-over-year growth and stood at $4.99 billion, missing analysts’ estimates of $5.04 billion. (See Alphabet stock charts on TipRanks)

Meanwhile, Traffic Acquisition Costs (TAC) came in at $11.5 billion, up 40% year-over-year.

The CEO of Google and Alphabet, Sundar Pichai, said, “Five years ago, I laid out our vision to become an AI-first company. This quarter’s results show how our investments there are enabling us to build more helpful products for people and our partners. Ongoing improvements to Search, and the new Pixel 6, are great examples.”

“And as the digital transformation and shift to hybrid work continue, our Cloud services are helping organizations collaborate and stay secure,” Pichai added.

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During the quarter, Alphabet repurchased 4.6 million shares for $12.6 billion, which included 0.5 million shares for $1.5 billion of Class A stock and 4.1 million shares for $11.1 billion of Class C stock.

On October 26, Jefferies analyst Brent Thill reiterated a Buy rating on the stock with a price target of $3,325 (19.03% upside potential).

Thill considers Alphabet a top pick and believes GOOGL to benefit from ad spend recovery, pent-up demand for Google Cloud, and call options on Waymo and other non-ad initiatives.

Shares of Alphabet have shot up 74.3% over the past year. Overall, the stock has a Strong Buy consensus rating based on 29 Buys and 1 Hold. The average Alphabet price target of $3,258.46 implies 17% upside potential.

Website Traffic

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Alphabet’s performance this quarter. According to the tool, the Alphabet website recorded a 13.85% monthly decline, year-over-year, in global visits in September. In contrast, year-to-date website growth, compared to year-to-date website growth in the previous year, came in at 10.22%.

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