Google is proving to be ultimate lockdown winner

Google owner Alphabet trumped market expectations by a huge margin, posting a record profit in the first quarter driven by a huge surge in online ad sales on its search results and YouTube videos.

Alphabet's total quarterly sales rose 34% to $55.3 billion (€44.2 billion), and net profit more than doubled to $17.9 billion.

Google and other tech peers, including Amazon, Apple, Facebook and Microsoft, have been among the biggest winners during the pandemic as people stuck at home used their services to stay connected, work from home and make purchases.  

"Over the last year, people have turned to Google Search and many online services to stay informed, connected and entertained," said Sundar Pichai, CEO of Google and Alphabet.

The "elevated consumer activity online" sent Google ad sales soaring 32% in the first quarter. The online advertising business accounted for 81% of Alphabet's first-quarter revenue.

"Google had an absolute monster quarter with ads leading the way," analyst Patrick Moorhead from Moor Insights and Strategy told DW in an email statement. "YouTube [advertising revenue] grew an eye-watering 49% year over year which I attribute to increased YouTube viewing and increased YouTube TV subscribers."

Riding the vaccine-led recovery

However, Alphabet warned on Tuesday the surge in usage and ad sales during the pandemic might slow as restrictions were gradually lifted and people resumed in-person activities.

"It's too early to forecast the extent to which these changes in consumer behavior and advertising spend will endure," Alphabet Chief Financial Officer Ruth Porat told analysts.

Analysts say the company was being conservative and that it's well-placed to ride the vaccine-led recovery, especially in its biggest market by revenue, the United States. The International Monetary Fund expects the US economy to grow by 6.4% this year, aided by the Biden administration's fiscal largesse and a rapid vaccination drive.

Google's ad business, a market leader by some distance with over 90% share, was hit at the height of the pandemic by a drop in advertising by travel and hospitality firms and brick-and-mortar retailers, key contributors to the tech company's search business. But travel and retail-related advertising seems to be picking up and is likely to soar as businesses react to the pent-up demand expected to be unleashed once the restrictions are lifted.

People have been locked down in their homes for months now, resulting in them hoarding hundreds of billions of euros in cash and bank deposits. When lockdowns are lifted, these people are expected to go on a spending spree, eating out and setting off on vacations, most likely after using a Google service to help with the planning.

  US and European regulators have been looking to tighten oversight on Google and other tech companies, especially regarding privacy and artificial intelligence.

With contribution from Reuters news agency.