A Quick Review of Alphabet Inc.’s ($GOOGL) Q2 & 1H FY2022 Results

A Quick Review of Alphabet Inc.’s ($GOOGL) Q2 & 1H FY2022 Results

Alphabet Inc. (NASDAQ:GOOGL), or Google (as we like to call it), needs no further introduction – they are the company behind the Internet’s biggest search engine, Google, along with its suite of products including Android, Chrome, Gmail, Google Drive, Google Maps, Google Play, and YouTube. 

This post was originally posted here. The writer, Lim Jun Yuan is a veteran community member and blogger on InvestingNote, with a username known as @ljunyuan and has close to 2,000 followers.

The NASDAQ-listed tech company released its results for the second quarter, as well as for the first half of the financial year on 26 July 2022, and in this post, you’ll find my summary of its financial performance, cash flow statement, and also whether or not the company is considered ‘cheap’ or ‘expensive’ at its current traded price. 

Alphabet Inc.’s Financial Performance – Q2 FY2021 vs. Q2 FY2022, and 1H FY2021 vs. 1H FY2022

  • Growth in the Alphabet’s total revenue (both on a q-o-q, as well as on a y-o-y basis) can be attributed to improvements in its advertising revenues (from Google Search, YouTube Ads, as well as Google Network), Google Cloud, along with hedging gains (for the current periods under review, compared to the same time period last year.)
  • Cost and expenses went up as a result of a rise in Traffic Acquisition Cost (TAC) paid to distribution partners and Google Network Partners (primarily driven by growth in revenues subject to TAC), increase in data centre and other operations costs (including depreciation expense, content acquisition costs – primarily for YouTube), R&D expenses (driven by an increase in compensation expenses, largely resulting from an increase in headcount, and increase in professional service fees), sales and marketing (from increase in advertising and promotional activities, and compensation expenses), as well as general and administrative (driven by an increase in professional service fees, and increase in compensation expenses – largely due to an increase in headcount.)
  • As a result of a higher percentage rise in cost and expense compared to total revenue (both q-o-q and y-o-y), its gross profit margin saw slight dips. 
  • Coupled with other expenses incurred (compared to income gained in both time periods) due to losses on equity securities and changes in accrued performance fees, its net income fell by 13.6% (q-o-q) and 11.0% (y-o-y); Net profit margin also saw declines in both time periods. 

Alphabet Inc.’s Cash Flow Statement – 1H FY2021 vs. 1H FY2022

  • The 8.1% increase in cash flow from operating activities was due to the net effect of increases in cash received from revenues, cash paid for costs of revenues and operating expenses, offset by an increase in tax payments driven by the effects of capitalisation and amortisation of R&D expenses beginning in 2022 as required by the 2017 Tax Cuts and Jobs Act, and other working capital.
  • While the company is still in a net cash position, but the amount is significantly reduced due to a 24.1% drop in cash & cash equivalent, along with a 2.8% rise in total borrowings.

Is Alphabet Inc.’s Current Share Price ‘Cheap’/’Expensive’? 

Disclaimer: I am currently invested in Alphabet Inc. at an average price of US$114.00.

Once again, this article is a guest post and was originally posted on Ljunyuan‘s profile on InvestingNote. 

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