This morning internet services and search engine giant Alphabet Inc. impressed investors with a better-than-expected revenue and profit result for the quarter ending June 30, 2019, alongside news of a $25 billion share buy back.
It's the strong growth rates that are impressive given Alphabet is no tiddler at a US$800 billion market value. Check out below how strongly it's still growing, despite cycling off very large numbers and comparables. All figures in USD.
- Revenue up 22% on a constant currency basis to $38.94b
- Adjusted operating profit (backing out a regulatory fine in Q2 FY18) up 13% to $9.18b
- Adjusted earnings per share up 21% from $11.75 to $14.21
- Paid clicks on Google properties up 28% on prior corresponding quarter
- Google 'other' (cloud & hardware business) revenues up from $4.43b to $6.18b
One important point to note on this is that while Alphabet's revenue and profit growth might look impressive in percentage terms, it's even more impressive in nominal terms. As the dollar value of additional revenue (e.g. $6.287b from Q218 to Q219) or profit it's adding versus comparable quarters is actually still growing, which is another reason the stock looks a buy in my book.
The impressive numbers are before you get into the extraordinary set of digital assets and other enterprises the company controls.
These include its search engine business Google, Gmail, Google Drive, Google Maps, Youtube, Verily, Waymo, Calico, Google Fibre, Android, and its cloud business among others.
Investing is not rocket science and in my view you'd be crackers not to want to own a slice of this business over the long term.
I also think its valuation looks good compared to almost every growth, tech or blue-chip share listed on the S&P/ ASX200 (ASX: XJO).
Notably the top performing business on the XJO over the past year is Magellan Financial Group Ltd (ASX: MFG), which is up around 160%. Much of its success is built on simply buying to hold blue-chip tech businesses like Alphabet and Facebook.
The one fly in the ointment is the increasing regulatory pressure on the business thanks to its growing dominance of the consumer-facing internet.
In the US the Dept of Justice has just opened an investigation into tech giants, while Alphabet has already been slugged with billions of dollars of fines by the European Union's competition regulator. Just today the ACCC in Australia also handed in a report over concerns Google and Facebook were blocking competition.
