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Alphabet profit sends shares up; overtakes Apple in value

Letters spell the word "Alphabet" as they are seen on a computer screen with a Google search page in this photo illustration taken in Paris, France, August 11, 2015. REUTERS/Pascal Rossignol

By Deborah M. Todd and Anya George Tharakan

(Reuters) - Alphabet Inc reported better-than-expected quarterly profit on Monday, sending shares of Google's parent soaring in after-hours trading and making it the most valuable U.S. company ahead of rival Apple Inc.

It was the first quarter the company provided information on what it calls 'Other Bets' such as self-driving cars, and the solid results eased investor concerns about the company's spending on ambitious projects.

"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.

Alphabet said consolidated revenue jumped 17.8 percent to $21.33 billion in the fourth quarter ended Dec. 31, from $18.10 billion a year earlier. Analysts had expected $20.77 billion, according to Thomson Reuters I/B/E/S.

Adjusted earnings of $8.67 per share handily beat analysts' average estimate of $8.10 per share.

Total operating losses on the Other Bets – which include glucose-monitoring contact lenses and Internet balloons - increased to $3.57 billion in the 12 months ended Dec. 31, and $1.2 billion in the fourth quarter.

In a call with analysts, Chief Financial Officer Ruth Porat attributed the strong earnings to "increased use of mobile search by consumers," as well as "ongoing momentum" in YouTube and programmatic advertising.

Google's shares were up almost 6 percent at $795.68 in after-hours trading, after breaking through the $800 level.

Alphabet's combined share classes were worth $555 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 advertising revenue increased nearly 17 percent to $19.08 billion, while the number of ads, or paid clicks, rose 31 percent, the company said. Analysts had expected paid clicks to increase 21.8 percent.

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. (http://bit.ly/1WY8V19)

Adjusted earnings of $8.67 per share excluded certain one-time items.


(Reporting by Anya George Tharakan in Bengaluru and Deborah M. Todd in San Francisco; Editing by Savio D'Souza, Stephen R. Trousdale and Bill Rigby)