Google: Parent company Alphabet's financial report for 1Q19 revenue was 36.3 billion

Revenue growth slowed, and profits were further affected by EU fines

Alphabet (Google's parent company) today released its first quarter financial report for fiscal year 2019 ending March 31. The report shows that Alphabet's total revenue in the first quarter was US$36.339 billion, a 17% increase from US$31.146 billion in the same period last year, and a year-on-year increase of 19% excluding the impact of exchange rate changes; according to US generally accepted accounting principles, Alphabet's net profit in the first quarter (including the impact of fines) was US$6.657 billion, a 29% decrease from US$9.401 billion in the same period last year. Excluding the impact of fines, Alphabet's net profit in the first quarter was US$8.339 billion, a decrease of 11% from the same period last year.

Revenue composition: Google business and other Bets businesses

Alphabet's total revenue in the first quarter was US$36.339 billion, up 17% from US$31.146 billion in the same period last year, and up 19% year-on-year excluding the impact of exchange rate changes.

Alphabet's Google division had first-quarter revenue (consisting of advertising revenue and other revenue) of $36.169 billion, up from $30.996 billion in the same period last year.

Alphabet's "Other Bets" business revenue in the first quarter was $170 million, up from $150 million in the same period last year.

If exchange rates were the same as the same period last year (excluding the related benefits of foreign exchange risk management programs), Alphabet's first-quarter revenue would have increased by 19% year-on-year.

Revenue by Region

By region, Alphabet's revenue from EMEA (Europe, Middle East and Africa) in the first quarter was $11.791 billion, up 13% year-on-year and down 5% quarter-on-quarter. Not in accordance with US generally accepted accounting principles (excluding the impact of exchange rate changes), based on the exchange rate in the first quarter of 2018, Alphabet's revenue from EMEA in the first quarter was $12.430 billion, up 16% year-on-year; based on the exchange rate in the fourth quarter of 2018, Alphabet's revenue from EMEA in the first quarter was $11.708 billion, down 4% quarter-on-quarter.

Alphabet's revenue from the Asia-Pacific region in the first quarter was US$6.112 billion, a year-on-year increase of 27% and a quarter-on-quarter increase of 1%. Not in accordance with US generally accepted accounting principles (excluding the impact of exchange rate changes), based on the exchange rate in the first quarter of 2018, Alphabet's revenue from the Asia-Pacific region in the first quarter was US$6.295 billion, a year-on-year increase of 31% and a quarter-on-quarter increase of 1%; based on the exchange rate in the fourth quarter of 2018, Alphabet's revenue from the Asia-Pacific region in the first quarter was US$6.030 billion, flat quarter-on-quarter.

Alphabet's revenue from the United States in the first quarter was US$16.532 billion, a year-on-year increase of 17% and a month-on-month decrease of 11%.

Alphabet's revenue from other regions in the Americas in the first quarter was $1.904 billion, up 10% year-on-year and down 13% quarter-on-quarter. Not in accordance with US generally accepted accounting principles (excluding the impact of exchange rate changes), based on the exchange rate in the first quarter of 2018, Alphabet's revenue from other regions in the Americas in the first quarter was $2.098 billion, up 21% year-on-year; based on the exchange rate in the fourth quarter of 2018, Alphabet's revenue from other regions in the Americas in the first quarter was $1.905 billion, down 13% quarter-on-quarter.

Google's business revenue composition: hardware, stores and other revenue contributions are still relatively low

Alphabet's advertising revenue in the first quarter (consisting of website revenue and network revenue) was $30.72 billion, up from $26.642 billion in the same period last year.

• Alphabet's first-quarter website revenue, or the revenue generated by Google's own websites, was $25.682 billion, up from $21.998 billion in the same period last year.
• Alphabet's first-quarter web revenue, or revenue generated by Google's partner sites through its AdSense program, was $5.038 billion, up from $4.644 billion in the same period last year.

Alphabet's other revenue in the first quarter was $5.449 billion, up from $4.354 billion in the same period last year.

Advertising revenue indicators: Click volume decreased by 9% month-on-month

The number of paid website clicks at Alphabet's Google division in the first quarter (including clicks related to ads on Alphabet's owned and operated websites in various regions, as well as clicks from search, YouTube engagement ads such as TrueView, and other owned and operated websites such as Google Maps and Google Finance) increased 39% compared with the same period last year and decreased 9% compared with the previous quarter.

Cost per click on websites at Alphabet's Google unit fell 19% in the first quarter from a year earlier and rose 5% from the previous quarter.

Alphabet's Google division's first-quarter web impressions increased 6% year-over-year and 5% sequentially. Alphabet's Google division's first-quarter web cost per impression increased 1% year-over-year and decreased 14% sequentially.

The proportion of traffic costs has slightly decreased

Alphabet's traffic acquisition expenses (TAC), or revenue shared with partners, were $6.86 billion in the first quarter, compared with $6.288 billion in the same period last year. Alphabet's traffic acquisition expenses accounted for 22% of advertising revenue in the first quarter, compared with 24% in the same period last year.

Of Alphabet's traffic acquisition expenses in the first quarter, $3.477 billion will ultimately be paid to network partners, accounting for 69% of the total traffic acquisition expenses; in the same period last year, the traffic acquisition expenses ultimately paid to network partners were $3.386 billion, accounting for 703% of the total traffic acquisition expenses.

In addition, $3.383 billion of Alphabet's traffic acquisition expenses in the first quarter will ultimately be paid to specific distribution partners and others who direct traffic to Alphabet's website, accounting for 13% of the total traffic acquisition expenses; in the same period last year, the traffic acquisition expenses paid to specific distribution partners and others who direct traffic to Alphabet's website were $2.902 billion, accounting for 13% of the total traffic acquisition expenses.

Costs and expenses: Total costs in the first quarter were $29.731 billion

Alphabet's total costs and expenses were $29.731 billion in the first quarter, up from $23.513 billion in the same period last year.

Among them, Alphabet's revenue cost in the first quarter was $16.012 billion, up from $13.467 billion in the same period last year; R&D expenses were $6.029 billion, up from $5.039 billion in the same period last year; sales and marketing expenses were $3.905 billion, up from $3.604 billion in the same period last year; general and administrative expenses were $2.088 billion, up from $1.403 billion in the same period last year; and the expenditure caused by the fine of the European Commission was $1.697 billion, which was not incurred in the same period last year. Alphabet's other income (net value) in the first quarter was $1.538 billion, compared with $2.910 billion in the same period last year.

Operating profit fell to $7.633 billion

According to US generally accepted accounting principles, Alphabet's operating profit in the first quarter (including the impact of fines) was US$6.608 billion, accounting for 18% of total revenue.

According to US GAAP, Alphabet's operating profit in the same period last year was US$7.633 billion, accounting for 25% of total revenue. Excluding the impact of the fine, Alphabet's operating profit in the first quarter was US$8.305 billion, accounting for 23% of total revenue.

Alphabet's effective tax rate in the first quarter was 18%, compared with 11% in the same period last year.

According to US generally accepted accounting principles, Alphabet's first-quarter net profit (including the impact of fines) was US$6.657 billion, down 29% from US$9.401 billion in the same period last year. Excluding the impact of fines, Alphabet's first-quarter net profit was US$8.339 billion, down 11% from the same period last year.

According to US GAAP, Alphabet's diluted earnings per share (including the impact of the fine) in the first quarter were $9.50, compared with $13.33 per diluted share in the same period last year. Excluding the impact of the fine, Alphabet's diluted earnings per share in the first quarter were $11.90.

Alphabet had 701 million diluted shares outstanding in the first quarter, compared with 705 million shares in the same period last year.

As of March 31, 2019, excluding cash classified as held for sale, Alphabet held cash, cash equivalents, and marketable securities totaling $113.488 billion, compared to $109.140 billion as of December 31, 2018.

As of March 31, 2019, Alphabet employed 103,459 full-time employees worldwide, compared to 85,050 as of March 31, 2018.