27 Apr

Google Reports on 1Q15: Currency Issues a Drag on Earnings

WRITTEN BY Puneet Sikka

Strong US dollar hits Google revenue growth 

Google (GOOG) (GOOGL) announced its 1Q15 earnings on April 23 after the close of trading. The company’s gross revenues increased by 12% on a YoY (year-over-year) basis to $17.3 billion. As the chart below shows, this growth rate marks a continued decline. The strong US dollar (UUP) shaved 5% off revenue growth, and is the main reason for the drop.

Meanwhile, the slowdown doesn’t come as a surprise to analysts, who have been expecting it. For more on Market Realist’s take on the situation, read What Google Investors Should Expect from First-Quarter Earnings.

Google Reports on 1Q15: Currency Issues a Drag on Earnings

Currency appreciation affects other large-cap tech companies

The currency impact has been even bigger for other large-cap companies in the tech sector. Facebook (FB) announced its earnings on April 22, noting a 7% hit on revenue growth as a result of currency headwinds. Similarly, eBay (EBAY) announced its earnings on April 22 and reported a 5% knock to its YoY revenue growth for the same reason. Apple (AAPL), which will announce its earnings on April 27, expects an even greater impact on revenue growth.

The strengthening US dollar could have caused Google more damage, had the company not benefited from its hedging program to such a significant degree. The company reported that the net impact of currency on Google gross revenues was $795 million, but this could have been $1.1 billion without the hedging program benefit.

Investors had been expecting currency issues to take an even bigger toll on Google earnings. Better-than-expected results made them happy, pushing up Google stock by more than 3% in the after-market hours of trading.

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