Strong Growth in Revenue for Alphabet

On Thursday, Google parent company Alphabet Inc posted a profit for the fourth quarter below estimates of analysts. The results were hurt by higher tax rates, but Wall Street cheered the progress of the company in diversifying beyond advertising.

While advertising represents the biggest share of revenue at Google, increasing 17.4% to end the quarter at $22.4 billion, CFO at Alphabet Ruth Porat said the company was broadening the business citing growth in app sales, hardware and its cloud business.

The other revenue of the company was up by 62% to end the quarter at $3.4 billion.

Porat said tremendous potential is seen ahead for the businesses along with the continued development of revenue streams that are non-advertising for YouTube.

The results were received with mixed reactions on Wall Street, which sent the stock down by 2.2% in extended Thursday trading.

Google faced a 22% tax rate that was higher than the overall year of 19%, which contributed to its hit to profitability. Looking above all that it was business as usual, an analyst on Wall Street said Thursday afternoon following the conference call with the Alphabet CFO.

Executives have suggested they are starting to reap rewards from their investments in hardware. The CFO spotlighted the line of smart home products known as Nest saying that sales had doubled during the important holiday season including on Black Friday as well as Cyber Monday.

Hardware that is Google-branded also was promising as a smart speaker and the Pixel smartphone were able to gain traction during the holidays, said CEO at Google Sundar Pichai during the conference call.

Google posted a 22.2% increase in revenue for the quarter, which was stronger than had been expected as its advertisers dished out more money to reach the growing user base that is spending more time on YouTube and smartphones.

Research company eMarketer estimates that Google is going to reach nearly $61 billion in revenue from search ads this year or almost 59% of the global search ad market.

Paid clicks or Google ad clicks increased 36% during the quarter compared to an increase of 33% for the third quarter.

Paid clicks represent those ads where an advertiser pays only if they were clicked on.

Analysts were expecting an increase of 26.8%. There was a drop of 9% in the cost per click, which was a slide that continues as Google sells more mobile advertising, which charges less.

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