Alphabet’s Q4 profit surges 43% on strong Google business

The company earned a net profit of $15.2bn in the three months to December 31

Alphabet's Q4 revenue increased 23.5 per cent to $56.9 billion, surpassing the analysts’ estimate for $53.1bn. AFP

Alphabet’s fourth quarter net profit surged 43 per cent on an annual basis, helped by a strong performance of Google's Services business that includes ads, Android, hardware, Maps, Search, and YouTube.

Net profit at Google's parent firm rose to $15.2 billion in the three months ending December 31, from the same period a year earlier.

Revenue during the period increased 23.5 per cent to $56.9bn, surpassing the analysts’ estimates for $53.1bn.

“Our strong fourth quarter 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, said.

“Cloud revenues were $13.1bn [up 46 per cent annually] for 2020, with significant ongoing momentum, and we remain focused on delivering value across the growth opportunities we see.”

Its stock closed nearly 1.4 per cent up at $1919.1 per share on Tuesday. It surged another 7.5 per cent in after-hours trading to $2063.8 a share.

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"Amazon and Alphabet did better than expected in the fourth quarter, hinting at a further growth potential in their businesses and making their investors feel better about their sky-high share prices," Ipek Ozkardeskaya, senior analyst at Swissquote, said.

Alphabet, which has more than 120,000 employees, generates a bulk of its revenue from internet advertising, app sales, digital content and fees received from subscription-based products such as YouTube Premium and YouTube TV.

The company has emerged a rare winner amid the pandemic, seeing a growth in its search business as home-bound users turned online for entertainment and connectivity. Google Search and other related businesses generated a revenue of $31.9bn in the fourth quarter, compared to $27.1bn in the prior year period.

Revenues from its Google Services arm - which includes its search business along with advertising, Android, Chrome, hardware, Google Maps, Google Play and YouTube - rose 22.4 per cent annually to $52.9bn during the quarter.

“Google products and support have been lifeline for millions of small businesses hit hard by the pandemic … our strong results this quarter reflect the helpfulness of our products and services to people and businesses, as well as the accelerating transition to online services and the cloud,” Sundar Pichai, the company’s chief executive, said.

Google, also for the first time, revealed the income from its cloud business as a separate entity.

The total revenue from cloud business grew nearly 47 per cent annually to $3.8bn, while revenue from other bets increased almost 14 per cent yearly to nearly 196 million.

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

“Google succeeds when we help our customers and partners succeed … we see significant opportunities to forge meaningful partnerships as businesses increasingly look to a digital future,” Mr Pichai said.