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Alphabet Shares Jump on Ad Revenue Gains in Holiday Quarter

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Nico Grant
·3 min read
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(Bloomberg) -- Alphabet Inc. reported quarterly sales that beat Wall Street estimates, buoyed by heavy digital advertising spending during the holiday shopping quarter. The shares jumped 7% in extended trading.

Fourth-quarter revenue, excluding payments to distribution partners, came in at $46.43 billion, the Mountain View, California-based company said in a statement. Analysts, on average, expected $44.2 billion, according to data compiled by Bloomberg.

Online ad sales have rebounded since the early days of the pandemic, when the economy faltered and marketers pulled back. Analysts expected Google to benefit from increased online search activity and YouTube viewership while people remained stuck at home to curb the spread of the virus.

The performance “was driven by Search and YouTube, as consumer and business activity recovered from earlier in the year,” Ruth Porat, chief financial officer of Alphabet and Google, said.

YouTube ad revenue jumped 46% to $6.9 billion. Wall Street was looking for $6.2 billion. Search and other related businesses generated revenue of $31.9 billion, up 17% from a year earlier.

Dan Morgan, a portfolio manager at Synovus Trust Company, said the results show Alphabet is capable “of delivering strong profit growth despite their behemoth girth.”

Last week, Facebook Inc. reported surging revenue growth after online shopping boosted the digital ads market. That spurred additional gains in Alphabet shares, which have climbed more than 10% so far this year.

Alphabet Chief Executive Officer Sundar Pichai is trying to rely less on Google’s main search advertising business, and he has been focusing on cloud computing as a way to diversify. The company trails Amazon.com Inc. and Microsoft Corp. in this market, where computing power, data storage and software services are rented over the internet.

“The past year also accelerated the shift to cloud, and adoption of online services,” Pichai said on a conference call with analysts. “This has profound implications for all companies and consumers and we’re pleased that so many trust us to help make this transition.”

Google said the cloud division had an operating loss of $1.24 billion in the fourth quarter. Analysts keenly awaited this new metric and some were expecting an operating profit.

Read more: Google Cloud Reports Huge Operating Losses in New Disclosure

Alphabet now has three reported segments and discloses revenue and the operating income or loss for each:

Google Services, which includes Search, advertising, Android, Chrome, hardware, Google Maps, Google Play and YouTube.Google Cloud, including the company’s technical infrastructure and data-analytics platforms, collaboration tools and other services for enterprise customers.Other Bets, such as the Waymo driverless car business.

Net income was $15.2 billion, or $22.30 a share, in the fourth quarter, compared with $10.7 billion, or $15.35 a share, a year earlier.

(Updates with comment from investor in sixth paragraph.)

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