Earnings Season: Alphabet spells earnings beat

Alphabet sees revenues surge as its headline quarterly earnings smash Wall Street estimates for another quarter.

Alphabet earnings

Alphabet Q4 2021 headline stats

Better-than-expected fourth quarter results were announced by the Google parent after market close yesterday.

This marks another consecutive Wall Street-beating quarter for Alphabet following the company’s stellar third quarter performance.

Shares jumped 9% on Alphabet’s report. Both earnings and revenues were up for the search engine giant. Here are some of the key stats from Alphabet’s Q4 2021 earnings report:

• Earnings per share – $30.69 vs. $27.34 forecast
• Revenue – $75.33 billion vs $72.17 billion forecast
• YouTube ad revenue – $8.63 billion vs $8.87 billion forecast
• Google Cloud revenue – $5.54 billion vs $5.47 billion forecast
• Traffic acquisition costs (TAC) – $13.34 billion vs $12.84 billion forecast

Overall, revenue was up 32% year-on-year during 2021’s fourth quarter. Alphabet has enjoyed a year of overperformance, compared against Wall Street analyst valuations and predictions, with the stock up some 65% across the year.

Alphabet’s performance is more than triple the S&P500’s and has comfortably outperformed other big tech firms such as Apple. Apple itself had a bumper Q4, and like Alphabet it saw its stock pop after sharing its financial results.

YouTube falls but ad revenues jump

YouTube’s advertising revenues fell on a quarterly basis. Google CEO Sunday Pichai said YouTube has 15 billion daily users. As this was the same figure he gave in July, that suggests user growth has stagnated.

Competition for YouTube, at least in short video format, has heated up with TikTok being the big rival. To compete against TikTok, YouTube has launched its Shorts service. We’ll see if that has any dramatic impact next quarter.

On the other hand, ad revenues across the rest of the Google network were up 33% year-on-year. According to Philipp Schindler, Google’s Chief Business Office, the retail segment contributed the most to advertising-sourced revenues, followed by the media and finance sectors.

Cloud computing services also saw substantial growth, with CEO Pichai saying Google enjoyed a 65% rise in the number of cloud deals worth $1bn or more during the review period. Revenues generated from Google’s cloud services rose 45% on an annualised basis for a total of $5.45bn.

Other revenues, which includes sales of hardware, Google Pixel phones, and Play Store purchases, rose from $6.67bn in Q4 2020 to $8.16bn in Q4 2021. Despite supply constraints of the type hitting almost all tech manufacturers, Pixel sales hit an all-time record, according to Pichai.

Despite all of the above, Alphabet’s TAC were higher than Wall Steet expected too. These are costs Google pays to generate web traffic from other websites.

On the whole, a thoroughly high-performing quarter for the search engine giant.

Alphabet announce 20:1 stock split

As well as sharing its quarterly earnings update, Alphabet also announced a stock split.

At the 20:1 ration, Alphabet share owners will see the value of their shares fall but will also get 19 extra to make up for that.

For example, were the split to happen at Tuesday’s market close price of $2,572.88, then shareholders would be given 20 individual shares worth $128.64. It amounts to the same, just there are more individual units.

This is a move companies often make when stock is worth thousands of dollars. Tesla and Apple have each performed stock splits recently.

Tech stocks generally started 2022 on the backfoot, in part thanks to a hawkish pivot from the Fed. In January, Alphabet fell 6.6%. As of this earnings report, however, the stock is back in the green.