Google parent company Alphabet profit jumps 9% as it plans 20-for-1 stock split

Alphabet's net profit jumped 36% to more than $20.6bn in the fourth-quarter

Google's revenue during the fourth quarter rose 32% annually to $75.3bn. Getty

Alphabet, the world's largest provider of search and video ads, reported a 36 per cent jump in fourth-quarter net profit on an annual basis, driven by a strong Google services and cloud businesses.

Net profit at Google's parent company jumped to more than $20.6 billion in the three months to the end of December, almost $5.4bn more than the same period in 2020. It was nearly 9 per cent up on a quarterly basis.

Revenue during the period rose 32 per cent annually to $75.3bn.

The company’s 2021 financial year net profit soared about 89 per cent to more than $76bn, while sales increased almost 41 per cent to $257.6bn.

“Our deep investment in AI [artificial intelligence] technologies continues to drive extraordinary and helpful experiences for people and businesses, across our most important products,” Alphabet’s chief executive Sundar Pichai said.

“Q4 saw ongoing strong growth in our advertising business, which helped millions of businesses thrive and find new customers … a quarterly sales record for our Pixel phones despite supply constraints and our cloud business continuing to grow strongly,” Mr Pichai said.

In October, the company launched two smartphones, the Pixel 6 and Pixel 6 Pro, to take market share from Samsung and Apple.

Google stock rose nearly 9 per cent to $3,002.9 a share in after-hours trading on Tuesday. Following the moves of Apple and Tesla in the past couple of years, the company also announced a 20-for-1 stock split that will go into effect in July.

Alphabet, which employs 156,500 people globally, earned nearly 46 per cent of its fourth quarter revenue or $34.7bn from the US market. In Europe, the Middle East and Africa, the company earned $23.2bn or 30.7 per cent of its total sales.

In the last quarter, Alphabet’s earnings per share rose 37.6 per cent yearly to 30.69, exceeding analysts’ estimates of $27.34.

Google services business — which includes advertisements, Android, Chrome, hardware, Maps, Search, Google Play and YouTube — accounted for more than 92 per cent of the company’s total sales. It added $69.4bn to overall revenue, almost 31.2 per cent more than the fourth quarter of 2020.

Google’s advertising revenue from Search, YouTube and other businesses increased 32.5 per cent yearly to $61.2bn in the fourth quarter.

The total revenue from the cloud business grew an annual 44.6 per cent to more than $5.5bn.

Google cloud includes the company’s infrastructure and data analytics platforms, collaboration tools and other services for enterprise customers. It generates revenue mainly from fees received for cloud platform services and workspace collaboration tools.

Alphabet said its operating loss in the cloud segment reached $890 million during the quarter, which narrowed from a $1.1bn loss in the same period in 2020. However, it expanded from the third quarter, when the division’s loss was $644m.

The company’s revenue from other bets, or subsidiaries, decreased more than 7.6 per cent yearly to $181m.

Other bets are derived mainly through the sale of internet offerings as well as licensing and research and development services. This includes Alphabet’s X lab, self-driving unit Waymo and other non-Google companies.

Alphabet spent $8.7bn on research and development, nearly 11.5 per cent of its total sales in the fourth quarter. It was 24 per cent more than the R&D expenditure of the same period in 2020.

The company’s double-digit growth in fourth quarter sales reflected “broad-based strength in advertiser spend and strong consumer online activity, as well as substantial ongoing revenue growth from Google cloud”, Alphabet’s chief financial officer Ruth Porat said.

“Our investments have helped us drive this growth by delivering the services that people, our partners and businesses need, and we continue to invest in long-term opportunities,” Ms Porat added.

YouTube added more than $8.6bn to Alphabet’s revenue, surging more than 25.3 per cent annually, beating streaming service company Netflix’s fourth-quarter revenue of $7.7bn.

Google’s TAC (total acquisition costs) stood at $13.4bn, up 28.2 per cent on an annual basis. It exceeded analysts’ expectations of $12.84bn.

TACs are payments that search companies make to affiliates and online companies for bringing traffic to their websites. It is a major source of expenses for companies like Google and Yahoo.

Alphabet’s total cash, cash equivalents and marketable securities reached more than $139.6bn at the end of last year, a year-on-year increase of almost 2.2 per cent.