Breakdown of the latest developments on the global exchanges
Apr 29, 2020, 10:31 AM GMT

Alphabet's First Earnings Report for 2020 Sends Investors Mixed Messages

Alphabet Inc., the parent company of the Google search engine, reported earnings for Q1 2020 yesterday, beating some estimates but disappointing in others. The company's share price tumbled by 3 per cent at the end of yesterday's trading session following the release of the report.

The best news from yesterday was that the company reported better-than-expected revenue for the three months leading to March. Alphabet recorded revenue of $41.159 billion for the quarter ending 31st of March 2020, comparatively more than the $36.339 billion that was generated for the same period last year.

Nevertheless, Diluted Earnings Per Share dropped on a yearly basis by almost two dollars. Diluted (Non-GAAP) EPS of $9.87 were reported yesterday vs $11.90 a year prior. The final results came short of the consensus forecasts, which were projecting EPS of $10.97.

The main reason for yesterday's drop in Alphabet's share price, following the release of the earnings report, is the observed sharp slowdown in ad revenues. The company recorded an increase of 13 per cent in revenues on a yearly basis, which is significantly smaller than the 17 per cent that was recorded for the same period last year.

Ruth Porat, Chief Financial Officer of Alphabet and Google, stated that:

"Performance was strong during the first two months of the quarter, but then in March we experienced a significant slowdown in ad revenues. We are sharpening our focus on executing more efficiently, while continuing to invest in our long-term opportunities."

Alphabet has benefited from higher users' retention while the policies of social distancing have been in place globally; however, the national lockdowns worldwide have impeded the company's advertising program, thereby affecting its share price negatively.

As can be seen on the 4H chart below, the price action of Alphabet's shares is nearing the lower edge of the ascending channel, which could spell tough times ahead for the ongoing bullish trend. The market momentum has already turned bearish.

Alphabet Inc. 4H Price Chart