We missed this earlier.

Alphabet, the parent company of Google, reported a 20% YoY increase in revenue in Q3FY19 financials, released on October 28.

  • Revenue: $40.5 billion, up 20% compared to Q3FY18 ($33.74 billion); Google accounted for 99.6% of Alphabet’s revenue at $40.34 billion
  • Net income: $7.07 billion compared to $9.19 billion in Q3FY18 (Google’s operating margin was 26.9%)
  • Number of employees: 114,096 compared to 94,372 in Q3FY18, a 21% increase, and a 6,450 increase over Q2FY18; most new hires were engineers and product managers, and most in Cloud
  • Costs and Expenses: $31.32 billion compared to $25.12 billion in Q3FY18. In the Q2FY18, Google paid $5.071 billion in fine to the European Commission, and $1.697 billion in Q1FY19

Closer look at costs and revenues

  • Advertising revenue: $33.92 billion, compared to $28.95 billion in Q3FY18, accounts for 83.75% of the total revenue
  • Google Sites revenue: $28.6 billion, up 19% compared to Q3FY18
  • Total traffic acquisition costs: $7.49 billion (22% of advertising revenue), compared to $6.58 billion (23% of advertising revenue) in Q3FY18. TAC is the price Google pays to companies like Apple so that Google Search is the default search engine on their devices.
  • Between Q3FY18 and Q3FY19, the cost-per-click on Google properties fell by 2% even though number of paid clicks increased by 18%. The cost-per-impression on Google Network Members’ properties fell by 3% even as the number of impressions increased by 12%.

Slower growth in APAC region in Q3: Ruth Porat, the CFO, acknowledged during the earnings call, that YoY growth in APAC region was lower in Q3 than in Q2 because of slower growth in Network business, and policy changes. Also, Pixel 3a was launched in Q2 which boosted YoY growth rate in Q2.

Data centres and content acquisition drive up costs: Porat said that costs associated with Google’s data centres and other operations were the largest. This was followed by content acquisition costs, primarily for YouTube, both advertising-supported content and subscription businesses such as YouTube Premium and. YouTube TV. Hardware costs were primarily associated with Pixel 3a smartphones.

Capital expenditure of $7.2 billion included investments in office facilities, data centres and servers. Office facilities include $1 billion acquisition of buildings in Sunnyvale and purchase of two buildings in Seattle area. Unlike a 70:30 split between technical infrastructure and office facilities in the past, Porat said that Q3 saw a 60:40 split.

Other businesses: Porat announced that Fiber and Verily generated revenues of $155 million, but other bets, including Waymo (self-driving car), Wing, etc., had an operating loss of $941 million.

Leap in quantum computing: Google CEO Sundar Pichai, during the earnings call, announced that Google’s 53 qubit quantum machine in Santa Barbara, Sycamore, performed a test computation, that would have taken other supercomputers much longer, in 200 seconds. Pichai called it the “hello-world” moment in quantum computing.

Financials: Earnings Release | Conference Call Transcript