Alphabet 1Q16 Earnings Call Notes

Ruth Porat – Chief Financial Officer & Senior Vice President

US revenue up 21% y/y

“U.S. revenue was up 21% year-over-year to $9.4 billion and down 9% versus Q4. UK revenue was up 15% year-over-year to $1.9 billion and flat sequentially. In fixed FX terms, the UK grew 21% year-over-year and 5% quarter-over-quarter. Rest of world revenue was up 14% versus last year to $9 billion and down 2% versus Q4.”

Operating income $5.3B

“On a GAAP basis, operating income was $5.3 billion, up 20% versus last year. The operating margin was 26%. Non-GAAP operating income was $6.8 billion, up 21% versus last year. The operating margin was 34%.”

Mobile continues to outperform

“what’s hopefully clear from the opening comments, is that Mobile continues to outperform. Desktop growth did pick up modestly in Q1, but, from opening comments, should be clear that Mobile Search revenue was up significantly.”

TAC is higher on mobile and mobile is growing at a faster rate

“And on your TAC question, as I’ve indicated a number of times already on the call, the TAC rate is higher on Mobile. Mobile’s growing at a faster rate and what you’re seeing here is a mix shift. So there is a delta between the two. But I think, importantly, we are benefiting from an important secular trend behind Mobile, and like the revenue dollars and the gross profit dollars that come as a result of that, and we’ll continue to innovate on mobile and are excited about the opportunity, in particular with all the changes that we continue to see in the way users use the phone and the opportunities.”

Sundar Pichai – Chief Executive Officer, Google, Inc.

We have just scratched the surface of what’s possible

“Google’s mission is to organize the world’s information and make it universally accessible and useful. And after 17 years, we have just scratched the surface of what’s possible. We are reinvigorated around this mission and, as you will hear, we are making solid progress across many of our products.”

Three main reasons why we’re ramping up cloud

“Just on the first one, I would say there are three points of inflection for us, and that’s why we are really ramping it up. The first is we’ve always been doing cloud. It’s just that we were consuming it all internally at Google, but as we have grown, really matured in terms of how we handle our data center investments and how we can do this at scale, we have definitely crossed over to the other side where we can thoughtfully serve external customers. So that’s the first point of inflection. The second point of inflection for us is as we’ve been investing in machine learning and AI for years, but I think we are at an exceptionally interesting tipping point where these technologies are really taking off. And that is very, very applicable to businesses as well, and so thoughtfully doing that externally, we view as a big differentiator we have over others. And third, is definitely Diane Greene coming in. And I think I want her to scale our efforts here thoughtfully when it is set up with a great leader who understands this space deeply. And so those are the three main reasons why we are significantly ramping up what we are doing there.”