Google parent company Alphabet beat Wall Street expectations for its fourth quarter earnings on Monday, although its stock slid in after-hours trading over investor concerns about increased spending.
Alphabet swung to a profit of $8.9 billion, up from a $3 billion loss in the same period a year ago due to the effects of a new federal tax law. Its revenue grew this quarter to $39.3 billion, up more than 21% from $32.3 billion last year.
But Alphabet also spent more on research and development and other expenses during the quarter, as it works to expand its cloud computing business and its long-term bets such as self-driving cars. Expenses rose to $31 billion compared with $24.6 billion in the same period a year ago.
“With great opportunities ahead, we continue to make focused investments in the talent and infrastructure needed to bring exceptional products and experiences to our users, advertisers and partners around the globe,” said Alphabet chief financial officer Ruth Porat.
Alphabet’s stock price dropped roughly 3% despite the beat in after-market trading Monday. Analysts attributed the decline to Alphabet’s increased investment in its cloud business, YouTube and other areas it hopes to grow.
Executives noted the company’s focus on expanding the cloud business during a call with analysts Monday, as it races to compete against rivals Amazon and Microsoft in the growing industry. Amazon currently leads in that market, followed by Microsoft and Google in a somewhat more distant third place.
Late last year, Google brought in former Oracle executive Thomas Kurian to lead its cloud business into what it hopes to be a rapid growth stage. Cloud bets are likely to start paying off in the coming years, said Wedbush Securities analyst Daniel Ives. And it would be short-sighted to count Google out, though Amazon and Microsoft’s businesses are larger.
“I think Microsoft and Amazon need to keep one eye open with Google,” he said.
The report offered no detailed breakdown of income but Google took in the overwhelming majority of revenue in the quarter, $39.1 billion, with $32.6 billion from advertising.
Google revenues from its “other” category, which includes what it pulls in from cloud services and hardware, climbed more than 30% to $6.5 billion in the fourth quarter.
Alphabet’s Other Bets business, which includes its self-driving car company Waymo and health-tech venture Verily, saw revenue rise to $154 million, up from $131 million in the year-ago period. But operating losses also ballooned to $1.3 billion, a 78% increase since the year-earlier quarter.
Industry tracker eMarketer forecast that Alphabet’s money-making engine Google would take in $102.43 billion in digital ad revenue this year, commanding 31.3% of the global market.
Alphabet’s head count grew to nearly 99,000 from 80,000 employees during the course of the year as expenses at the internet colossus climbed.
Alphabet is the latest of the big tech firms to report earnings for the final three months of the year.
Google remains a dominant player in online advertising even as Alphabet has ventured into “moonshots” in new sectors.
But Google is a key target of “techlash,” with probes in Europe on monopoly abuse in search and advertising on its Android mobile ecosystem, and could be impacted by proposed privacy rules in the United States.
Last week, Amazon reported a record profit of $3 billion on strong holiday sales, while Microsoft saw an $8.4 billion profit.
Facebook’s profit jumped to $6.9 billion as ad revenues kep growing and Apple reported a $20 billion profit, despite lower iPhone sales.
The results come after a roller-coaster period with drops of more than 20 percent in the value or Apple and Amazon, which have lost their trillion-dollar status, and with Facebook and Google seeing increased pressure to deal with concerns on privacy and data protection.
Leave a Reply