Alphabet shares took off after the company’s fourth-quarter results handily topped Wall Street’s expectations, with profits and sales for its ad business riding higher as the economy recovers from the pandemic.
The company reported fourth-quarter net income of $15.23 billion, which amounts to $22.30 a share, compared with a net profit of $10.67 billion, or $15.35 a share, a year earlier. Revenue rose to $56.9 billion from $46.08 billion.
Wall Street was expecting earnings of $15.71 a share, on sales of $52.67 billion, under generally accepted accounting principles.
“Our strong results this quarter reflect the helpfulness of our products and services to people and businesses, as well as the accelerating transition to online services and the cloud,” Alphabet CEO
Sundar Pichai
said.
Google’s advertising businesses brought in the biggest share of sales and profit, with revenue of $46.2 billion. Search accounted for the majority of that total, with $31.9 billion, followed by Google’s ad-networking business with sales of $7.4 billion, and YouTube, which reported revenue of $6.89 billion.
In the earnings release, CFO
Ruth Porat
said the company’s ad units benefited as consumers and businesses begin to recover from the economic damage caused by the Covid-19 pandemic.
The company’s fourth-quarter traffic acquisition costs, a metric that is closely watched by investors, rose to $10.47 billion, from $8.5 billion a year ago. The total represents the money Google spends on deals such as its agreement with
Apple
(AAPL) to make Google the default search engine on many of its devices. As a part of its antitrust suit against Alphabet, the Justice Department has said the company’s payments to Apple amount to $8 billion to $12 billion a year.
While Google’s cloud-computing efforts accounted for just $3.83 billion of the company’s overall sales, analysts and investors have been looking to the unit both as one of the businesses where Google can grow the most, and as an area that is free from regulatory concerns—for the moment.
The company reported that full-year cloud revenue rose 32% to $13.06 billion. In its first disclosure of operating results for the cloud operation, it said the business had a quarterly operating loss of $1.24 billion, which widened from $1.19 billion a year earlier.
As Barron’s noted earlier Tuesday, several analysts had expected a negative operating margin, but predicted that as the unit grows it will achieve margins of greater than 20%. It is likely that Google is spending more cash on expanding the various aspects of the cloud business as it attempts to scale it up to compete with rivals such as
Amazon.com
(AMZN) and
Microsoft
(MSFT).
Alphabet stock has gained 34% in the past year, while the
S&P 500
index rose 19%.
Write to Max A. Cherney at max.cherney@barrons.com
