Published: Wed, February 06, 2019
Finance | By Jaime Brady

Google parent’s fourth-quarter revenue, profit beat estimates

Google parent’s fourth-quarter revenue, profit beat estimates

Quarterly profit was $8.95 billion, or $12.77 per share, compared with a $3 billion loss a year ago.

Impressions on Google network member properties remained at 7%, but the cost per impression on these properties rose to 7%, up from 5% in the year-ago quarter. Revenues in the USA rose 20% while revenues from Europe, the Middle East and Africa rose 29%, helped by the strength of the euro and the pound.

For all that, investors apparently expected a little more operating income, which at $8.2 billion came in a bit short of the $8.6 billion consensus.

Shares of Alphabet were down 2.8 percent after hours, trading at $1,109.50.

Alphabet shares have climbed 9 percent since the beginning of the year, while the Standard & Poor's 500 index has risen roughly 9 percent.

Alphabet is relying on its ad business to support sales and profit growth as it develops new offerings such as cloud services and consumer hardware. Chief Executive Sundar Pichai (pictured) has said only that it's a billion-dollar-a-quarter business, and that was a year ago. Alphabet's results in that division were higher than the $7.62 billion Wall Street projected.

"Google Cloud closed out the year strong, with momentum across the board", Pichai said on an earnings conference call. It's also seeing an "uptick" in $100 million contracts, Porat said.

If they want to stay ahead of the game, they're going to need to continue to invest.

Google's main source of competition is not Facebook but Amazon. Amazon.com (AMZN) may be the only other USA company that has more than $100 billion of annual revenue and 20%-plus top-line growth.

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Cloud engineers and sales professionals also made up the bulk of the 4,000 employees it hired during the quarter, Porat said.

Porat talked about a moderation in head count growth and capital spending in 2019, but didn't provide specific details.

He's happy Google is spending heavily on YouTube, cloud and hardware.

Google remains a dominant player in online advertising even as Alphabet has ventured into "moonshots" in new sectors. So Google is responsible for 109 percent of Alphabet's profits and 69 percent of its revenues. It is simply getting more expensive for Google to stay Google.

When Alphabet Inc. reports results after markets close on Monday, the company's key advertising business is expected to show few signs of wear from privacy concerns that have weighed on internet companies recently. For the latter, much of the cost jump over the year was from fiber cable rollouts - Google has an bad lot of private fiber - while the ad giant also invested in, among other things, data centers and the hiring of more sales and research workers.

There are also many scary unknowns about Alphabet. In particular, Amazon has been aggressively expanding its ad business, which is small but growing quickly.

That represents a 96.2% share of OTT video users in the USA, according to eMarketer. Monday reported a strong revenue growth of 22 percent year over year to hit 39.27 billion US dollars in the fourth quarter.

The yearly numbers looked positive as well - revenue grew from $110.85 billion to $136.81 billion or about 23%.

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