Alphabet is the parent company of Google the search engine and everyday, millions of people go to Google and search something. At that moment the aspect someone is searching for is recorded and if a company can advertise to the person, the ads will come up. Google makes its money selling advertising.
In an article from Reuters, Google’s ad business accounted for 81% of the quarterly revenue with sales of $56.29 billion falling short of expectations of $56.67 billion.
Over profit for the company in the quarter was $16 billion or $1.21 a share compared to the estimated $1.29 a share.
One of the ratios investors look at is costs to sales. Google has been averaging gross profit margins as high as 60%, Google similar to many tech companies has slowed down its hiring to better manage expenses.
Cloud computing is important to Alphabet as Google is the second largest cloud computing company behind Amazon and ahead of Microsoft.
Linking to dividend paying stocks, you can think of companies anyway you wish to, but as investors you want to know how do they make their money and what are their margins. In the case of Alphabet it sells advertising but we all know it as search engine. As the markets become greater segmented, companies need to buy advertising.
There are more questions than answers, till the next time – to raising questions.