Susan Li of FOX Business on her conversation with Alphabet CEO Ruth Porat, covering quarterly earnings, cloud revenue and antitrust lawsuits.
Alphabet Inc., the father of Google, reported record revenue on Tuesday for the second quarter in a row despite the pandemic, increasing shares by 6%, exceeding estimates for advertising and cloud sales as customers released budgets for the holiday.
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The cuts by travel and entertainment advertisers in 2020 were almost offset as the year went on by new spending by retail customers and others that were driven online by COVID-19 blocks.
Google’s advertising business, including YouTube, accounted for 81% of Alphabet’s $ 56.9 billion sales in the fourth quarter, which increased 23% compared to the previous year.
Google’s cloud unit also benefited from the pandemic. Google Cloud sales were $ 3.83 billion, or $ 13.1 billion for the full year, up 46% from 2019.
Analysts accompanied by Refinitiv estimated quarterly revenue of $ 53.1 billion and cloud sales of $ 3.82 billion.
In a new disclosure, Alphabet said Google Cloud posted an operating loss of $ 1.24 billion in the fourth quarter and $ 5.6 billion in 2020, a loss 21% greater than in 2019.
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Google, which generates more revenue from Internet advertising than any global company, has long had doubts about whether it can turn its advertising business money into a profitable venture. The new financial details suggest that the goal may still be years away.
Alphabet’s quarterly earnings grew 43% to $ 15.2 billion, or $ 22.30 per share, compared to the average estimate of $ 10.895 billion, or $ 15.95 per share.
The company said it expects a $ 2.1 billion increase in operating results in 2021, after a new assessment extended the life of its servers and network equipment by a year or more.
Alphabet’s shares rose 6% to $ 2,035.95 in Tuesday’s trading session. The shares have risen 9.5% so far this year.
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Although Alphabet increased its treasury by $ 17 billion in 2020, to $ 137 billion, investors continue to examine its rising expenses.
Alphabet’s costs of licensing YouTube programming, operating data centers and stocking consumer products have skyrocketed in recent years. These other revenue costs now account for about 27 cents for every $ 1 in sales, up from 23 cents four years ago.
The company’s traffic acquisition costs, which include revenue sharing agreements with Apple Inc and other companies to distribute Google services, are growing more slowly than other costs and have stabilized at around 18% of sales.
Last year, the company slowed hiring and capital spending.
Alphabet’s revenue, which for years has consistently increased by around 20% per year, in 2020 increased by just 12.8%. This marked its slowest growth since 8.5% during the Great Recession in 2009.
The company remains undervalued compared to some rivals. The shares of Microsoft Corp that entered Tuesday were traded at 10 times the expected revenue in the next 12 months and Facebook Inc seven times, while the shares of Alphabet were about six times.
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Google’s leadership in the global Internet advertising market is shrinking as Amazon.com Inc. becomes a bigger threat and China-focused vendors like Alibaba are recovering more quickly from the pandemic. Last week, research firm eMarketer estimated that Google will capture 30% of the market in 2021, increasing sales by 18% to $ 117 billion.
Google is battling antitrust charges or investigations in Australia, Asia, Europe and North America.
In addition, Google has threatened to withdraw its search engine from Australia if the country applies new rules that would require the company to negotiate fair payments to news publishers to include its content in the results.
Analysts also expressed concern about possible revisions to content moderation laws under the new president of the United States, Joe Biden. These laws currently favor companies like Google.
Alphabet is also monitoring a nascent effort to unionize workers and facing constant criticism about its poor performance in hiring and retaining women and racial minorities.