Alphabet Ups Quarterly Revenue By 22%

Alphabet org chart

CBJ — Google parent Alphabet Inc posted fourth-quarter profit below analysts’ estimates, sending its shares down almost 3%.

However, the company posted a stronger-than-expected 22.2% increase in quarterly revenue as advertisers spent more to reach an expanding user base that spends more time on smartphones and YouTube.

Google’s ad revenue, which accounts for the bulk of its business, rose 17.4% to US$22.40 billion in the fourth quarter.

Despite the slight miss on earnings per share, analyst Kerry Rice of Needham and Company said the strong revenue growth suggests that Google’s core business remains healthy.

“The top line indicated that the growth fundamentals are still well intact for the business,” he said.

Research firm eMarketer has estimated that Google will capture US$60.92 billion in search ad revenue this year, or 58.8 per cent of the search ad market worldwide.

Paid clicks, or clicks on Google ads, rose 36 per cent, compared with a 33 per cent increase in the third quarter. Paid clicks are those ads on which an advertiser pays only if a user clicks on them.

Analysts on average had expected a rise of 26.9 per cent, according to FactSet StreetAccount.

Cost-per-click dropped nine per cent, a slide that has continued as Google sells more mobile ads, which command lower prices. However, the shift is not necessarily alarming as it suggests Google is selling more ads on YouTube, which are seen as a key growth driver, Rice said.

Alphabet’s Other Bets revenue increased to US$262 million from US$150 million a year earlier, while the operating loss of US$1.09 billion narrowed from US$1.21 billion.

Other Bets includes broadband business Google Fiber, home automation products Nest, self-driving technology company Waymo as well as X, the company’s research facility that works on “moon shot” ventures.

Alphabet’s net income rose to US$5.33 billion, or US$7.56 per Class A and B share and Class C capital stock, in the fourth quarter, from US$4.92 billion, or US$7.06 per share, a year earlier.

The company’s consolidated revenue rose to US$26.06 billion above the average estimate of US$25.26 billion.

@CanBizJournal

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