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Alphabet’s Q3 Results Beat Expectations, Driven by Advertising and Cloud; Raising FVE to $3,400

Senior Equity Analyst Ali Mogharabi

Ali Mogharabi Senior Equity Analyst

Analyst Note

| Ali Mogharabi | Oct 27, 2021

Alphabet third-quarter results beat the FactSet consensus estimates on the top and bottom line, benefiting from strong advertising demand in various verticals, less impact of Apple’s changes to its iOS, and continuing strong growth in cloud. With further YouTube and other Google apps monetization opportunities and the firm’s increasing traction in the cloud market, we have slightly increased our projections, resulting in a 6% increase in our Alphabet fair value estimate to $3,400. Wide-moat Alphabet continues to trade at a discount to our fair value estimate.

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Company Profile

Business Description

Alphabet is a holding company, with Google, the Internet media giant, as a wholly owned subsidiary. Google generates 99% of Alphabet revenue, of which more than 85% is from online ads. Google’s other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, the Pixel smartphone, and smart homes products, which include Nest and Google Home, also contribute to other revenue. Alphabet’s moonshot investments are in its other bets segment, where it bets on technology to enhance health (Verily), faster Internet access to homes (Google Fiber), self-driving cars (Waymo), and more. Alphabet’s operating margin has been 25%-30%, with Google at 30% and other bets operating at a loss.

Contact

1600 Amphitheatre Parkway
Mountain View, CA, 94043

T +1 650 253-0000

investor-relations@abc.xyz

Sector Communication Services

Industry Internet Content & Information

Most Recent Earnings Sep 30, 2021

Fiscal Year End Dec 31, 2021

Stock Type Aggressive Growth

Employees 150,028

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