Alphabet forsees a not-so-bright- future despite reporting record profit

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Google parent Alphabet Inc on Tuesday reported record profit for the second consecutive quarter.

Alphabet also revealed it is planning a $50 billion share buyback.

However, she warned a surge in usage and ad sales during the pandemic may slow as people resume in-person activities.

Alphabet, propped by an elevated online customer activity, beat analysts’ revenue estimates and nearly surpassed the sales record it set in the fourth quarter.

Google ad sales jumped 32% in the first quarter compared with a year ago, above expectations of analysts tracked by Refinitiv. Cloud sales increased 45.7%, in line with estimates.

Alphabet shares rose about 4.3% to $2,390.10 in extended trading.

The results provided the first sign that Google services such as search and YouTube may hold on to gains made since lockdowns and other pandemic restrictions forced people to shop and communicate online over the last year.

About 17% of people in the United States, Alphabet’s top region by revenue, were fully vaccinated against COVID-19 by the end of the first quarter.

Activities including in-person dining resumed in big cities in March, and security screenings at U.S. airports had their busiest day in a year.

But Alphabet Chief Financial Officer Ruth Porat told analysts on Tuesday, “it’s too early to forecast the extent to which these changes in consumer behavior and advertising spend will endure.”

Alphabet’s overall quarterly sales rose 34% to $55.3 billion, above analysts’ estimate of 26% growth from a year ago and close to the $56.9 billion it reported in the fourth quarter. Revenue benefited by an unspecified amount from Google’s acquisition of smartwatch maker Fitbit in January.

Alphabet’s quarterly profit was $17.9 billion, or $26.29 per share, beating estimates of $15.88 per share and topping its previous-high of $15.2 billion last quarter.

But nearly $4 billion of earnings came from unrealized gains in venture capital investments and recalculating depreciation of some data center equipment.

The high sales pushed operating margins up to 30% for the first time since incorporating as Alphabet in 2015 even as its costs began to pick up again for hiring, legal matters and building out new facilities.

Alphabet in 2020 suffered its slowest sales growth in 11 years but posted record profit and boosted its cash hoard by $17 billion after slowing hiring and construction.

The share repurchase authorization by Alphabet’s board follows a $25 billion buyback program announced in 2019. Jefferies analyst Brent Thill estimated Alphabet now has $56 billion left to spend buying its shares.

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