Google parent Alphabet just released fourth quarter and full year earnings. The company surprised analysts and beat their consensus expectations on the top and bottom lines. CFO Ruth Porat said the company’s revenue growth was a product of mobile search acceleration, YouTube and programmatic.
Fourth quarter revenue was $21.3 billion versus expectations of $20.8 billion. Earnings per share were $8.67 compared with expectations of $8.09. Full year revenues were nearly $75 billion.
Here’s the Q4 geographic revenues breakdown:
US revenue was up 24 percent year over year to $10.3 billion, up 18 percent sequentially.
UK revenue was up 16 percent year over year to $1.9 billion, up seven percent sequentially.
Rest of World revenue was up 12 percent year over year to $9.1 billion.
Source: Alphabet Q4 earnings release
While Apple had a nearly $76-billion quarter, investors are now more bullish on Google’s outlook. Accordingly, Alphabet’s valuation is poised to surpass Apple and make it the most valuable company in the world.
That was the first quarter where Alphabet provided greater visibility into revenue performance in non-core Google “other bets.” There was a significant operating loss ($3.5 billion), which grew versus last year ($1.9 billion).
Google reported that paid clicks were up 31 percent year over year but CPCs were down 13 percent. Investors have become less concerned about the decline in CPCs because of the growth of paid clicks and mobile revenues in particular.
Source: Alphabet Q4 earnings release
Google now has more than $73 billion in cash and cash equivalents on hand. Like Apple, Google holds most of that money overseas.
Notes from the earnings call:
CFO Ruth Porat reviewed the results described above in more detail. She then turned to Alphabet’s other bets (just got the pun), which had an operating loss of $3.6 billion. The $448 million in other bets revenue was primarily driven by Next, Fiber and Verily.
Mobile search was the biggest revenue growth driver in Q4.
Other bets is about “moonshots” and revolution, not evolution, Porat says, as well as building long-term revenue opportunity.
Google CEO Sundar Pichai:
Forty car brands now integrating Android Auto.
Search, Android, Maps, Chrome, YouTube, Google Play and now Gmail all have over one billion users.
Have shipped more than five million Cardboard VR viewers.
AdWords is now just over 15 years old, and “the product is largely unrecognizable from the first version that launched in 2000.”
Mobile search was particularly strong in the fourth quarter. Thirty percent of e-commerce now mobile. Local Inventory Ads (on mobile) drove “millions of incremental store visits” for Target.
Mobile YouTube reaches “more 18–49 year-olds than any cable network in the US.”
Number of SMBs that advertise on YouTube has doubled in the past two years.
Financial analyst questions:
Most of the analyst questions were focused in one way or another on growth and future outlook, Google’s competitive position and expenditures.
Questions focused on AI, Google’s enterprise cloud business (and how competitive it is with Amazon and Microsoft) and other bets. So far, the questions have been straightforward, and so have the answers.
Several questions have been about the losses reported for other bets. Google argues that these are long-term investments, and investors shouldn’t expect profitability in the near term.
There were questions about capital expenditures and Google’s ongoing investments. As might be expected, Google’s Porat defined them as critical for long-term success.
Asked about the developing world, Google’s Pichai said that 80 percent of YouTube views come from outside the US. He also characterized the YouTube Red rollout as a success but didn’t provide any subscriber numbers.
Pichai said that while desktop search growth is healthy, there’s a “secular shift” to mobile going on for Google’s business.
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