Google propels Alphabet’s record revenue, boosting market share by 8%

The Google LLC logo is seen at the Google Store Chelsea in Manhattan, New York, U.S., November 17, 2021. REUTERS/Andrew Kelly/File Photo

Feb 1 (Reuters) – Google’s parent company Alphabet Inc (GOOGL.O) on Tuesday reported record quarterly sales that beat expectations as its internet advertising business surged on consumers using Google Search when they were buying online and advertisers were increasing their marketing budgets.

Alphabet shares jumped more than 8% in after-hours trading, also rising on the company’s announcement that it would undertake a 20-to-one stock split.

The results are the latest to confirm that the global trend towards a more digital economy has made Big Tech companies resilient to small market shocks. As concerns about rising inflation, COVID-19 variants and supply chain shortages have rattled Wall Street and hurt sales for some companies, companies that control major gateways to e-commerce , hybrid work and streaming entertainment have not seen a decline since the start of the pandemic.

Alphabet sales jumped 32% to $75.3 billion in the fourth quarter, setting a third straight quarterly sales record and beating the average estimate of $72 billion among financial analysts tracked by Refinitiv.

Consumers dived into Google Search looking for apparel and hobbyist goods, while advertisers in retail, finance, entertainment and travel increased their marketing budgets, said the chief commercial officer of Google, Philipp Schindler, on an earnings call.

Analysts said Google, which generates more revenue from internet ads than any other company, is proving its growth is unstoppable for the foreseeable future.

“The pandemic has easily accelerated the world’s reliance on digital advertising,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown. “Watching traditional TV commercials or reading billboards suddenly seems completely archaic in the age of streaming and mobile phone addiction.

Alphabet shares rose 8.6% in after-hours trading to $2,990.10, erasing their year-to-date losses. Shares of competitors in online ads including Facebook owner Meta Platforms Inc (FB.O), Twitter Inc (TWTR.N), Trade Desk Inc (TTD.O) and Snap Inc (SNAP.N) also increases.

As part of the planned 20-for-one stock split, investors beginning July 1 will receive an additional 19 shares for each held. The split, which is subject to shareholder approval, will make the stock more affordable and potentially eligible for inclusion in more stock indices.

Shares of Apple Inc (AAPL.O) and Tesla Inc (TSLA.O) rallied in 2020 after splits, but more brokerages such as Robinhood Markets (HOOD.O) are allowing buying of fractional shares, diminishing certain advantages of the tactic.

BANNER YEAR

For the full year 2021, Alphabet’s sales increased 41% to a record $258 billion. Sales had risen just 13% in 2020, the slowest rate in more than a decade, after advertisers cut spending in the early weeks of the pandemic.

In 2021 and 2020, Google’s advertising business, including YouTube, accounted for 81% of Alphabet’s revenue.

Companies like Amazon.com Inc and ByteDance’s TikTok have taken small shares from Google in the global advertising market. But market forecasters don’t expect a major slippage from Google’s leadership position. Google’s secondary businesses, including Cloud, also increased their overall sales.

Google Cloud, which serves customers such as online shopping software maker Shopify Inc (SHOP.TO), increased quarterly revenue by 45% to $5.5 billion, above estimates of 5, $4 billion.

The division’s operating loss fell 45% to $3.1 billion in 2021.

Alphabet chief executive Sundar Pichai told analysts that Cloud is exploring how to support customers who want to use blockchain, one of many emerging technologies that supporters say is crucial to ushering in a new era of online innovations. .

Alphabet also announced record quarterly sales over the holiday season for its Google Pixel smartphones, despite what Pichai called “extremely tight” supply constraints.

Alphabet’s quarterly profit was $20.6 billion, or $30.69 per share, beating expectations of $27.56 per share and marking a fourth consecutive quarter of record earnings. Earnings benefited from unrealized gains from Alphabet’s investments in startups, and the company also received a $2 billion boost last year by extending the useful life of its servers and equipment. network.

For the full year 2021, Alphabet’s earnings grew 89% to $76 billion.

Alphabet’s total costs in 2021 rose 27% to $178.9 billion as the company began to resume its pre-pandemic hiring and building pace. The company also noted an increase in legal fees, costs of a one-time bonus of $1,600 for all employees, and an increase in charitable contributions as it matched the increase in employee donations.

Numerous lawsuits accusing Google of anti-competitive behavior in the advertising and mobile app store markets continue to be one of the company’s biggest challenges. Google has previously said that its efforts to reduce Play app store fees to assuage some of the concerns will hurt revenue.

Alphabet’s cash hoard grew by nearly $3 billion in 2021 to $139.6 billion, and another $50 billion was spent on stock buybacks.

The operating loss of Other Bets, a unit that includes standalone tech company Waymo and other non-Google businesses, was $5.3 billion in 2021, down from $4.5 billion in 2020. The company did not offer a 2022 financial outlook for the unit.

Reporting by Nivedita Balu in Bengaluru and Paresh Dave in Oakland, California; Additional reporting by Diane Bartz in Washington and Noel Randewich in Oakland, Calif.; Editing by Anil D’Silva, Matthew Lewis and Leslie Adler

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