Alphabet Inc reported better-than-expected quarterly profit yesterday, sending shares of Google’s parent soaring in after-hours trading and making it the most valuable United States company ahead of rival Apple Inc.
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The company posted net income of $US4.9 billion for the fourth quarter, an increase from $US4.7b a year ago.
Adjusted earnings of US$8.67 per share excluded certain one-time items. That figure easily topped the average estimate of $8.10 per share. That ranking, of course, could shift again in regular trading Tuesday.
Porat said the strong revenue growth was a return on years of investment in mobile search, YouTube and so-called programmatic advertising, which involves ads being sold automatically using software.
Apple has retained the title of “most valuable tech company” since 2010, when it passed Microsoft at a valuation around $220 billion. All of those factors have helped lift Alphabet’s (Google’s) by 43 percent since the end of 2014. Ahead of an earnings report from Alphabet, the firm had a market capitalization of about $514 billion as compared to Apple’s roughly $543 billion. We gave you advance notice that this might happen late last month when Alphabet’s enterprise value (which adds debt and subtracts cash from the market cap) surpassed Apple’s. In addition to reversing a long expansion of Google’s operating expenses, Porat also persuaded Alphabet’s board to spend $5 billion buying back its own stock.
Google’s finance chief Ruth Porat hailed the “vibrancy of the business” during the announcement, with video sharing site YouTube, as well as the widely used Google search engine, named as the core of the company’s growth.
The majority of Googles revenue is from ads, and while the number of ad clicks have gone up 31%, the cost per click has gone down 13 percent. Profit reached $4.9 billion, up 5 percent from $4.7 billion the year before. Apple registered an operating profit margin of 32 percent in its most recent quarter.
These “Other Bets” are long-term investments because, obviously, if they come to fruition, they could make Google a boatload of money.
Alphabet adopted the new structure, and agreed to disclose additional financial details, in part to respond to investor calls for more transparency as Google branched into new fields like health care, transportation and communications. Google had become known for its free-spending habits and reluctance to share information with analysts.
“It’s a very healthy bottom-line beat”, said Josh Olson, an analyst at Edward Jones and Co.
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Google CEO Sundar Pichai said, “Above all, our Q4 results show the great momentum and opportunity we have in mobile search and across Google’s range of businesses”.
