By Mark Tlisold | StockMarketNews.Today | Mark137Tlisold@gmail.com
Alphabet Inc., parent company of the Internet search giant, reported mostly strong fourth-quarter results Monday afternoon. Revenue grew 22% year over year to $39.3 billion, beating Wall Street’s forecasts.
That was driven by yet another quarter of 20% growth for the company’s colossal advertising business, which now generates more than $116 billion in revenue annually.
Smaller ventures that include the Google Cloud platform and the device business also are doing well. Revenue for the “Google Other” segment that includes the last two surged 38% to nearly $6.5 billion for the quarter.
But, as is often the case, what Google spends sometimes overshadows what it makes. Its research-and-development bill climbed 40% year over year to a record $6 billion in the quarter.
Another record was set by capital expenditures, which surged by 64% to $7.1 billion. The latter is nearly twice Microsoft’s outlay for the period. Those sharp jumps weighed on Alphabet’s operating earnings and free cash flow, both of which came in slightly shy of Wall Street’s forecasts, pressuring its shares after-hours.
Alphabet’s spending has long been a legitimate point of concern for investors. It bears noting, though, that the recent big-ticket items are the result of a conscious effort to diversify the business away from its historical dependence on advertising.
Meanwhile, other important items seem to be coming under control. Google’s traffic acquisition costs grew only 15% year over year, lagging behind ad-revenue growth for the first time in nearly three years.
Chief Financial Officer Ruth Porat also said on Monday’s call that capital expenditures are expected to “moderate quite significantly” this year.
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