Core advertising business ups Alphabet Google revenue by 23% – an indication of strong growth

 

 

 

On Tuesday, the shares of Alphabet the parent company of tech giant Google rose by almost 8% in extended trading. This was a result of the company’s report of Q4 earnings. The earnings have surpassed analysts’ estimates and favor growth in the company’s core advertising business.

The company surpassed expectations in the following:

  1. According to Refinitiv analysts expected $15.90 per share but the adjusted share value was $22.30 per share
  2. As per Refinitiv expected revenue was $53.13 billion but reported revenue was $56.90 billion
  3. According to StreetAccount analysts expected $3.81 billion on Google Cloud but the reported figure was $3.83 billion
  4. As per StreetAccount the expectations for YouTube ads were $6.11 billion and the company reported a higher revenue of $6.89 billion
  5. According to Street Account analysts expected traffic acquisition costs to be $9.32 billion but were reported to be $10.47 billion by the company

In a statement the company said that Alphabet’s revenue increased by 23% in this quarter, calculating on an annualized basis. This is an increase in growth as last year’s quarter 4 results were 17%. This indicates that despite the slowdown in the second quarter last year, Google’s advertising business is on the path to recovery.

The advertising revenue in Q4 was $46.20 billion, an increase by 22% from $37.93 billion in the fourth quarter in the previous year. It also showed that advertising revenues that had plunged during Q2 as the pandemic raged, were recovering and advertisers were spending more. The second quarter was the first ever year-on-year revenue decline for Google.

YouTube was the one platform that benefited a lot due to a huge growth in “direct-response” ads. It remained strong throughout the year and has become one of their “largest and fastest growing ad offerings” according to Philipp Schindler, Google’s chief business officer. However, brand campaign spend was heavily impacted in the course of the pandemic.

CWEB Analyst’s have initiated a Buy Rating for Google (GOOGL)   and potential upside of $3000 by 2021.  


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