Revenue vs Operating Income
Google's parent, Alphabet, reported its Q1 results on 26 April, with EPS missing expectation, coming in at $24.62 diluted ($25.76 - forecast). However, its revenue of $68.01bn was 22.95% up from its previous comparable period, with Google Cloud revenue beating analysts' expectations at $5.8bn and up 43.8% YoY. Below left, we can see how the revenue for Services and Cloud are up on the comparable period from last year. However, when we look at operating income (right), Cloud is negative, even though its revenue beat forecast. I.e. even though Google Cloud increased by $1.8bn, its operating income only improved by $43m from a loss of $974 to a loss of $931m.
Youtube's revenue printed at 6.9bn for Q1, about 9% below Wall Street forecasts. Management cited a decline in ad spending in Europe, exposure to Russia and notably a drag from Shorts, which competes with TikTok. This isn't very reassuring because YouTube has aggressively rolled out Shorts in more than 100 countries.
Cash vs Debt
Considering the company's balance sheet, we note that total cash and short-term investments are close to $134bn. This massive cash pile warps the company's total debt and long term leases, which is around $26bn. I.e. GOOG can pay down its debt many times over.
Revenue and Free Cash Flow Growth
Over the last year, revenue growth and free cash flow show signs of a decline in growth rate. According to Koyfin, the mean forecasted growth rate for revenue over the next three years is 14.71%. This number is notably lower than the ten-year historical average of 21.34%.
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Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.