(Bloomberg) — Google parent Alphabet Inc. posted fourth-quarter sales and profit that topped analysts’ projections, showing the resilience of its advertising business in the face of major economic upheaval as the pandemic persists. The shares soared in late trading.
The internet-search giant reported sales, excluding partner payouts, rose 33% to $61.9 billion, compared with the $59.4 billion average analyst estimate. Google’s advertising revenue also grew by 33% during the holiday quarter, despite the disruptions to its biggest categories, travel and retail, from the spread of the omicron Covid-19 variant and supply chain crunches. The company also declared a 20-for-1 stock split.
Two other key growth areas, cloud computing and YouTube, also posted robust sales gains. Since the start of the pandemic, Google has been investing heavily in online commerce, luring in more merchants to sell items on its shopping service and run product ads. During the fourth quarter, YouTube launched a new shopping initiative with some of its young star creators. Overall viewership of the video site has continued to climb, particularly on TV screens.
“Google remains one of the best-positioned companies across digital advertising given its market-leading position in search, exposure to video with YouTube, and full ad tech offering,” Andrew Boone, an analyst at JMP Securities, wrote in a research note before the results.
Net income climbed to $20.6 billion, or $30.69 a share, compared to the $27.35 per-share estimate, Alphabet said Tuesday in a statement. Shares surged 7.4% in extended trading, after closing at $2,752.88. The stock has declined about 5% so far this year.
Google managed to beat analyst estimates in nearly every business unit, including search ads, cloud computing and its grab-bag “other” line that includes hardware and app store sales. Google’s Network business, which runs ads on other websites, grew 26% to $9.31 billion, despite increased regulatory pressure on the display ads operations.
The YouTube video site raked in $8.63 billion during the holiday, a gain of 25% but just shy of the $8.76 billion analysts were expecting on average. Of all Google’s divisions, YouTube is the most exposed to changes Apple Inc. has made to limit targeting on iPhones.
In their third-quarter report, Google executives said YouTube had seen a “modest impact” on revenue from Apple’s move to limit ad targeting on iPhones. Compared with rivals like Meta Platforms Inc.’s Facebook and Snapchat parent Snap Inc., Google is less reliant on third-party trackers Apple has banned. In a research note before earnings, analyst Mark Mahaney of Evercore ISI wrote that “Google has likely been a beneficiary” of Apple’s restrictions.
In recent years, Google has directed a hefty portion of its investment and new personnel to its cloud division, which lags behind Amazon.com Inc. and Microsoft Corp. in selling computing power and storage to corporations. Google’s cloud unit generated $5.54 billion in sales in the fourth quarter, when it picked up some key customers such as CME Group. Analysts were anticipating $5.42 billion.
Alphabet also continued to invest heavily in nascent businesses, including Waymo, the self-driving car unit, and Verily, which aims to solve various health issues with technology. Those units, known as Other Bets, collectively lost $1.45 billion for the recent quarter.
Traffic acquisition costs — the funds Google pays out to publishers and device makers like Apple Inc., a figure investors monitor closely — rose 28% in the quarter.
Google still has money to spend, with cash and equivalents of $139.6 billion as of year’s end. But the company is the target of a mounting number of lawsuits and regulatory threats, sparking some concern about how that scrutiny may limit its ability to expand. A trio of states have brought recent privacy cases against the company, adding to antitrust suits in Texas and its home state of California, and a federal antitrust suit brought by the U.S. Justice Department. Congress has also introduced a suite of bills that could force Google to curb some of the data-collection practices that power its ads business.
The stock split will take the form of a one-time special stock dividend, the Mountain View, California-based company said Tuesday in a regulatory filing. Alphabet said it will give $0.001 for each share of the company’s Class A stock, Class B stock and Class C stock.
(Updates with details on unit sales, split starting in sixth paragraph)
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