Google parent Alphabet reports stellar Q4 earnings beating expectations

Google Q4 2021

Increase in revenue - The revenue reported by Alphabet for Q4 was $75.33 billion, higher than the street estimate of $72.17 billion. The revenue increased by 32% YoY. The revenue from advertising came at $61.24 billion in Q4 '21, a jump of 33% from $46.2 billion from the year-ago period. 

Segment Revenue: The main revenue source from ‘search engine’ stood at $43.3 billion. YouTube ad revenue of $8.6 billion, was the only metric that fell short of analysts expectations. The company’s cloud reported revenue growth of 45% to $5.54 billion. The company saw 65% year-over-year growth in the number of cloud deals worth over $1 billion. The revenue from self-driving car Waymo and life sciences unit Verily was at $181 million, marginally lower than last year in the same period. The revenue from hardware, PlayStore, and non-advertising YouTube revenue increased from $6.67 billion to $8.16 billion in Q4' 21.

Jump in profits - The company reported a 36% increase in profit to $20.64 billion in Q4'21. The profit was higher than the street estimate of $19 billion. The Earning Per Share (EPS) was $30.69 as compared to the street estimate of $27.34.

Traffic Acquisition Costs (TAC) - The metric is used to show how much the company pays other websites to acquire traffic, which came in higher than the street estimate of $12.84 billion at $13.43 billion. Google's traffic acquisition costs rose 28.3% YoY.

Stock Split - The company announced a 20 for 1 stock split and it will go into effect in July. Alphabet intends to split the Class A, Class B, and Class C shares of the stock, according to the earnings statement. The change requires shareholder approval. The company is aiming to entice the numerous small investors who have flocked to the stock market during the pandemic. The shares jumped 10% in U.S. premarket trading on Wednesday.

Increase in the headcount - Google said it hired 6,500 employees during the quarter, raising its total headcount to 156,500 people. The company will continue to hire new employees at the same pace.

Target Price - Based on 18 Wall Street analysts offering 12-month price targets for Alphabet Class A in the last three months. The average price target is $3,441.47 with a high forecast of $3,925 and a low forecast of $3,000.

Management Commentary: “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,” Alphabet CEO Sundar Pichai said in a statement.

Alphabet Q4 Results Review: 

Alphabet beat the street estimates in both topline and bottomline. Google’s blockbuster earnings were proof that the tech giant continues to make massive profits in the face of supply chain constraints, concerns about inflation, and a prolonged pandemic. It is also a reminder of the underlying power of its business and how regardless of the circumstances surrounding it. 

Alphabet Inc. is bringing big stock splits back to the market, so prospective buyers won’t need upwards of $3,000 to own a share. Taking down the price achieves something else for the Google parent: making it possible to put America’s third-biggest company into its most venerated stock average.

The stock surged 65% last year, beating all other Big Tech companies and more than tripling gains in the S&P 500. The share price closed 1.73% higher on Tuesday night at $2,752.88 per share.