The company earnings of $1.21 per share on $69.69 billion of revenue, both slightly below consensus estimates, as growth slowed dramatically from last year. The company’s revenue growth slowed to 13% from 62% a year earlier, and advertising revenue only increased 12%. YouTube advertising revenue rose only 5% after jumping 84% in the same quarter a year ago.
But the results came days after Snap delivered a bad quarterly report that led to a nearly 40% plunge in its stock price. In that report, Snap warned that early Q3 advertising sales were flat compared with last year, which was tracking far behind the full Q3 growth of 18% that analysts were expecting. After the bad news, investors also sold off shares of Alphabet, along with other companies that rely a lot on advertising.
But with so much bad news priced in, shares rallied when Alphabet’s results and guidance were simply not horrible.
“With advertising revenue approximately in line with consensus and as shares were down 11% since reporting 1Q earnings, we view the report positively despite us reducing forward estimates,” wrote JMP’s analysts in a note, saying that they will maintain Alphabet’s outperform rating and the price target of $160.
“Our primary takeaway is that search’s demand is persistent even in a tough macro advertising environment given its consistent and high ROI while benefiting from its diversification across online and offline as well as across verticals and geographies.”
Still, Alphabet stock is down nearly 23% this year.