Alphabet Inc, parent company of Google, are taking the world health crisis in their stride. Google stocks have jumped around 7%, after Ruth Porat, Chief Financial Officer, updated the world on company priorities. She also made bold predictions about the company’s future, suggesting where the situation as a whole would be by the end of the year. But these predictions are being largely criticised, with some experts saying that attempting to declare future plans as solid, at this point, is akin to playing online pokies; a game of luck.
It need not be said that the majority of other companies have gone into survival mode, preparing to weather a still ongoing storm. Most are extremely hesitant about suggesting what would be on the cards for the second and third quarter, given the obvious number of variables involved. Google, on the other hand, came out swinging, and Wall Street has jumped at the chance to support them.
But is it all just a case of the blind leading the blind?
The truth of the matter is that, as it stands, Google isn’t exactly in a good place. The first quarter was a disastrous one, with ad sales plummeting by roughly 10%. But this was to be expected and is in line with virtually every other company in the world. Porat acknowledged this and confessed that the second quarter was to be as bad, if not worse. She did, however, assure that steps were being taken to minimise losses.
Netflix and Intel are reporting equally devastating first and second quarters, with numbers also firmly in the red. However, executives at these firms were not making any future predictions. Google on the other hand were not shy about suggesting that the company would be in a good place for the second half of the year.
Porat explained that by the second half, cost cutting measures would begin reflecting on the bottom line. She also pointed out that global expansion, which included purchasing offices around the world, and hiring staff, would be slowing. More to the point, it was hinted that ad revenue would also begin to normalise, pulling things back together. Other companies were not so brazen in their predictions.
Wall Street Responds
Predictably, much criticism was heard in regard to the announcement. Wall Street however was not shy about rewarding the bold outlook. As the report concluded, stocks jumped an initial 3%. But as Porat elaborated on company cost cutting measures and verified that plans to buyback stocks would be maintained, another 7% jump occurred.
Though, this wasn’t even all the good news that Google had. It was also declared that various sub-businesses were doing well, beyond what the company is most known for. Namely; cloud services. With most stuck at home, and having to work remotely, demand for Cloud Computing platforms has gone through the roof. To be more precise; cloud-based services jumped in the first quarter up 52%. That is a stunning $2.4 billion in revenue.
What Wall Street Wants
If Google is or isn’t being bold in its predictions, the fact of the matter is that the announcements by Alphabet Inc. are exactly what Wall Street wanted to hear. Even with the cost cutting measures taken into consideration, in a time of such uncertainty, confident claims about what the future holds are an oasis in an otherwise chaotic and confusing time.
Many are also likely well aware that Google expertly navigated a previous difficult time; the recession that took place in 2008. At that time the Cloud Computing services had even been in their infancy, and not offering the support pillar that now exists. So, that Google is capable of weathering the current crisis doesn’t seem impossible. In fact, general consensus seems to be that if any tech giant is able to come out of this mostly unscathed, it is probably one as large and flexible as Google. Though for the time being, there are still many that consider the tech mega-corporation a touch overconfident, which is often a recipe for disaster in times of crisis. Only time will tell if Google is the proverbial giant bought down by a pebble.