Updated: Feb 17
"Alphabet, the parent company of Google, had earnings of $22.30 vs $15.90 beating analysts’ expectations thanks to a 46% increase in ad revenues with Youtube along with solid growth in its cloud business, the future looks bright for Google."
By: Allan R. Kirby
A great return to advertising
Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG), the parent of Google just had a blowout quarter that showed great earnings improvement as a result of advertisers returning to spend, but they also revealed new financial details about its cloud division, something that we are pleased to see. First, let's look at how they did:
Earnings: $22.30 per share, adjusted, vs., $15.90 per share as expected by analysts.
Revenue: $56.90 billion, vs. $53.13 billion expected.
Google Cloud: $3.83 billion, vs. $3.81 billion expected and up from $2.61 billion a year earlier and an operating loss of $1.24 billion.
YouTube ads: $6.89 billion, vs. $6.11 billion expected, plus Advertising revenue on YouTube, increased 46% in the fourth quarter.
Traffic acquisition costs (TAC): $10.47 billion, vs. $9.32 billion expected.
“Our strong fourth quarter performance, with revenues of $56.9 billion, was driven by Search and YouTube, as consumer and business activity recovered from earlier in the year,” Alphabet CFO Ruth Porat said in a statement.
Alphabet broke out operating income from its cloud business for the first time, with $3.83 billion for the fourth-quarter while full-year 2020 revenue came in at $13.059 Billion. Additionally, the company's cloud segment lost $5.61 billion for 2020 and $1.24 billion during Q4. This comes as no surprise as it's apparent the company is still investing heavily in its cloud business. However, Alphabet is making inroads and winning deals such as the recently announced new partnership with Ford. The agreement will bring Android Automotive to Ford’s Ford and Lincoln-branded cars, starting in 2023. But as a bonus the deal also includes Ford choosing Google Cloud as its preferred cloud provider.
On 3 August, Google parent Alphabet Inc. announced the issuance of a USD $5.75 billion environmental, social and governance (ESG) bond - the largest ever in the corporate sustainable or green bond market.
Google cloud is arguably is one of the top cloud computing services but is still behind AWS and Microsoft Azure. Additionally, the heavy investing will pay off at some point, which likely means Google cloud will at some point turn a profit and become a top player. I see no issues having 3 or 4 major players in the field of cloud computing, my bets are with Google, AWS, and Azure.
MyFinacialSuccess: Google is a highly valued ESG stock and one that is suited for younger investors looking for solid company that is focused on the future.
There was a lot to like with this earnings release, Youtube ad revenues were fabulous and it was great seeing the cloud numbers which gives us a better perspective on how Google is working to catch up to Amazon and Microsoft. I particularly liked the recent news on the cloud deal with Ford which is a win for both companies. It's becoming clear to me Alphabet has the capability to move deeper into the auto sector in the coming years and more deals could happen. Google has another tailwind, travel which accounts for around 10% of their revenue, this segment of the search took a hit back in March but should recover later years.
This is a great stock and one that will continue to grow for years to come, they are trying to diversity from just search. They are doing this through cloud computing as well as leveraging their expertise from their work on Waymo, an American autonomous driving technology development company, in order to help them make inroads in the auto industry.
Take the time, do your research and see if this is a stock to add to your, portfolio, we think this is a great company with a great track record and lots of growth will likely continue.
ESG Investment Note: On August 3, 2020, Google parent Alphabet Inc. announced the issuance of a $5.75 billion environmental, social, and governance (ESG) bond. This is the largest ever in the corporate sustainable or green bond market. The money will be used to support investments in both environmental and social initiatives. Additionally, there will be a focuses on racial equality as well as smaller businesses impacted by the COVID-19 pandemic and green sustainable projects.
Good for them!
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