• Alphabet,   the parent company of Google and YouTube, reported Q2 results on Wednesday   with the company beating both top and bottom-line estimates.

  • Revenues   surged by a whopping 62% to $61.9 billion for the quarter, which was above   expectations of $61.2 billion. The bulk of revenue continued to be generated   from search which generated $35.8 billion, up 68% on Q2 2020. YouTube   advertising revenue totalled $7 billion up 84% and above the $6.37 billion   that was expected. Google Cloud revenue for Q2 totalled $4.6 billion, up 53%   and ahead of the $4.4 billion which was forecast.

  • The   impressive increase in revenues fed through to operating income, which increased   to $19.3 billion for the quarter compared to $6.4 billion in Q2 2020. This   near 3-fold increase in operating profits came despite a $600 million loss in   cloud and a $1.4 billion loss in so-called other bets. The operating margin   was 31%, up from 17% in the year-ago period.

  • EPS   for Q2 2021 totalled $27.70 compared to $10.21 in Q2 2020. EPS was also   boosted by the repurchase of approximately 10 million shares. In April, the   Alphabet board authorised the company to repurchase up to an additional $50   billion of its stock.

  • Alphabet's   operating cash flow was $21.9 billion, up 56% from Q2 2020. Free cash flow   for the quarter totalled $16.4 billion. The company ended the period with   cash and cash equivalents of $23.6 billion, up from $17.7 billion in the   year-ago period.

  • Excluding the loss from the cloud business, $1.4 billion lost on "other bets" and considering the company’s vast cash balance, Alphabet trades at a multiple of around 30X, which we feel is not excessive for this exceptional high-quality company with potential significant optionality. Alphabet is key holding in both the Cratos BCI Worldwide Flexible Fund as well as Cratos offshore managed portfolios.