Google's parent company Alphabet was set to overtake Apple as the most valuable company in the world after announcing its financial results for the last three months of 2015.
The company easily beat Wall Street’s quarterly profit forecasts on Monday, helped by strong mobile advertising sales, sending the shares of Alphabet almost 5 per cent higher in after-hours trading. Alphabet’s combined share classes were worth $549 billion, compared with Apple, which had a value of about $534 billion.
Alphabet will officially overtake Apple in market value if both companies’ shares open around current levels on Tuesday.
Google’s parent company reported a 17.8 per cent rise in quarterly revenue on Monday.
For the first time, the company disclosed the profitability of Google’s search engine and its other online services, and how much it is spending on ambitious technology projects such as self-driving cars. The numbers were lapped up by investors, who saw room for growth in Google’s traditional business, and were relieved to see that spending on new projects it calls ‘Other Bets’ was not as lavish as some had feared.
"It's pretty interesting that 80 per cent of YouTube views come from outside of the United States. I didn't think it would be that high," said Kevin Kelly, managing partner at Recon Capital. "It demonstrates that the value of YouTube can continue to be extracted," he said.
The operating profit margin for its Google unit was 31.9 per cent in the most recent quarter, compared to 25 per cent for Alphabet.
Consolidated revenue jumped to $21.33 billion in the three months ended December 31st, from $18.10 billion a year earlier. Net income in the fourth quarter rose to $4.92 billion from $4.68 billion.
Moonshot misses
Total operating losses on “Other Bets” - which includes “moonshots” such as self-driving cars, glucose-monitoring contact lenses and Internet balloons - increased to $3.57 billion in the 12 months ended December 31st.
Alphabet spent $869 million on capital expenditures for the Other Bets in 2015, up from $501 million in 2014. It has not made any projections about if or when those bets cumulatively would become profitable. “As long as the core business continues to operate well with accelerated revenue... investment in those businesses can continue,” said Ronald Josey of JMP Securities.
Google chief executive Sundar Pichai said its Gmail service crossed one billion monthly active users last quarter, joining Search, Android, Maps, Chrome, YouTube and Google Play in topping that mark. He also touted the company’s performance during the holiday shopping season, saying that programmatic video impressions doubled this season compared to last, and that 60 percent of them came from mobile devices. But chief financial officer Ruth Porat, without providing figures, said the company planned to accelerate capital expenditures in 2016 compared to the previous year.
Advertising pays
Google’s advertising revenue increased nearly 17 per cent to $19.08 billion, while the number of ads, or paid clicks, rose 31 per cent, the company said. Advertisers pay Google only if someone clicks on their ad.
Net income in the fourth quarter rose to $4.92 billion, or $7.06 per Class A and B share and Class C capital stock, from $4.68 billion, or $6.79 per share.
Excluding one-time items, Google earned $8.67 per share. Analysts on average had expected a profit of $8.10 per share and revenue of $20.77 billion.
- (Reuters/Bloomberg)
