YouTube is the early star of Google parent company Alphabet's 2021 financial performance.
Alphabet reported Tuesday after the close that YouTube advertising sales surged 49% year-over-year to $6 billion as people continued to consume large amounts of content at home during the pandemic. The sales gain marked an impressive acceleration in growth for YouTube — fourth quarter sales in 2020 rose 46% and improved 32% in the third quarter.
"YouTube is the new TV," Jefferies tech analyst Brent Thill wrote in a new research note on Wednesday. "It's ironic that the name "YouTube" refers to bulbous TVs that existed before flatscreens. YouTube on connected TV is now the go-to video viewing experience instead of linear TVs, and ad budgets are following quickly."
While YouTube shined in the quarter, Alphabet overall turned in an impressive start to the year. Operating profit margins rose 230 basis points from the fourth quarter to 36%. Sales for Google Cloud increased 45.6%, Search rose 30.1% and Google Network improved 30.1%.
Here is how Google performed compared to Wall Street estimates for the first quarter:
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Revenue, excluding traffic acquisitions costs: $45.6 billion vs. $42.6 billion expected and $33.71 billion year-over-year
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Q1 GAAP earnings per share: $26.29 vs. $15.64 expected and $10.79 year-over-year
To cap off the upbeat earnings release, Google revealed a new $50 billion stock buyback.
Shares of Alphabet rose 4% in Wednesday trading.
"Alphabet further strengthened its case among the most compelling ideas in our coverage," Guggenheim Securities analyst Michael Morris said in a client note. Morris lifted his price target on Alphabt to $2,850 from $2,400 maintained a Buy rating.
The takes on Alphabet's quarter and outlook from analysts Thill and Morris were echoed by others on the Street.
"We come away from the 1Q print more bullish on the medium term revenue AND margin outlook for Alphabet, across both the core Google services business as well as Cloud," said Deutsche Bank analyst Lloyd Walmsley, who now has a $3,050 price target on the stock go along with a Buy rating.
Yahoo Finance's Emily McCormick contributed to this story.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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April 28, 2021 at 11:28PM
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Google's YouTube is really proving it's this generation's TV: analyst - Yahoo Finance
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