Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG), parent company of Google, surprised investors last week with higher-than-expected revenue and non-GAAP (adjusted) earnings per share (EPS). The news sent shares soaring 10% on the trading day following the quarterly update. This is a no-joke move for a company with a market capitalization over $800 billion ($850 billion at the time of this writing).
Here's a closer look at the numbers in the search giant's second quarter that impressed investors, including Alphabet's "Google other" revenue, strong performance from the cloud, and more.
1. Revenue increased 19%
Alphabet's revenue increased 19% year over year in Q2, rising to $38.94 billion. This growth rate marked an acceleration from 17% revenue growth in the first quarter. This acceleration is a welcome change for investors, as revenue growth decelerated in Q1, coming down from a growth rate of 22% in the fourth quarter of 2018.
In constant currency, Alphabet's revenue rose 22% year over year -- also an acceleration from 19% constant-currency revenue growth in Q1. This revenue growth was driven by "ongoing strength in mobile search, in particular, as well as YouTube and Cloud," said Alphabet CFO Ruth Porat in the company's second-quarter earnings call.
Q2 revenue easily beat analysts' consensus estimate for revenue of $38.15 billion.
2. Non-GAAP EPS jumped 21%
Higher-than-expected revenue led to better-than-expected profitability during the quarter. Alphabet's earnings per share excluding one-time items rose 21% year over year to $14.21. This crushed analysts' average forecast for non-GAAP earnings per share of $11.30.
3. Google other revenue soared 40%
Alphabet's other revenue, which primarily consists of sales from its cloud business, its Google Play app store, and hardware saw revenue surge 40% compared to the year-ago period. Cloud and the Google Play app store were the primary drivers of this growth, management said during the company's second-quarter earnings release.
4. Cloud achieved an annual revenue run rate of $8 billion
Alphabet's cloud-computing business, which is lumped into the company's Google other segment, remains a substantial catalyst for Alphabet. In fact, management confirmed during the company's earnings call that cloud is the company's third-largest driver of revenue growth, after mobile search and YouTube.
Management provided some rare insight into its cloud business, noting that it has achieved an annual revenue run rate of $8 billion. While this is still small relative to Alphabet's nearly $150 billion in trailing-12-month revenue, it's quickly growing in importance to the company since it's growing faster than Alphabet's overall business. Highlighting how strong cloud is growing for Alphabet, management said it was the primary driver of Google other's 40% year-over-year revenue growth rate.
Looking ahead, investors will watch to see whether Alphabet can maintain its strong growth.