Why Alphabet Stock dropped 5% after earning

What happened

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGLE) The stock is again worth $ 1 trillion – and that’s not good news.

Before the earnings went up yesterday (after trading came to a close), the internet search giant was trading at around $ 1,500 per share and had a market capitalization of $ 1.05 trillion. Today, investors are selling the stock – still down 4.5% as of 1:30 pm EDT – and Google Parent shares are back at the $ 1 trillion level.

Image Source: Getty Image

So what

And yet the alphabet did not miss yesterday on earnings. this To beat.

Analysts estimated that Alphabet would earn only $ 8.21 per share on sales of $ 37.4 billion. Alphabet beat those numbers with a stick, earning $ 10.13 on $ 38.3 billion in sales.

So why is the stock down today? Well, for one thing, that revenue “beat” what was told by last night’s alphabet that it was a pyramid of sorts. Yes, on one hand, it was better than expected. But it still represents a 2% drop in revenue from Q2 last year – the alphabet for the first time sometimes Reported a decline in revenue from its business.

Likewise earning no. Alphabet beat on earnings, but it recorded it in Q2 2019, reporting a 29% lower GAAP gain in Q2 2020.

now what

Don’t count the alphabet yet though. Amid all the bad news, there was also good news to report. Google search revenue may decline, but YouTube advertising revenue climbed 6%. Alphabet’s cloud computing business, however, is nowhere near as big as some of its rivals’, growing 43% in the quarter.

Meanwhile, despite falling GAAP profits, with rising cash in operations and falling capital expenditures, Google generated $ 8.6 billion in positive free cash flow in the quarter – 23% ahead of reported net income and 32. % Year on year.

Currently trading at around 32 times free cash flow, Alphabet’s stock may not be cheap, but it is still a fairly cash-profitable enterprise, and it is growing its cash strongly.

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