Google parent ends blockbuster year with sales gains

by Trip Mikel | UPDATE 2 01, 2022 06:19 EST

Search giant plans 20-for-1 stock split; Its profit increased by a third

Google parent Alphabet Inc. posted another quarter of strong sales growth, capping a year when profits nearly doubled despite mounting regulatory pressure that threatened the search giant’s future.

The company’s dominance in online search, video and Internet ad sales made it one of the major beneficiaries of growth in digital advertising last year. Last year, small and large businesses alike flooded the advertising market to win over customers who had spent the early parts of the pandemic in their homes.

Alphabet on Tuesday reported fourth-quarter revenue of $75.33 billion, a 32% increase from a year ago when advertising spending began rising on hopes that the economy would bounce back in 2021 after the Covid-19 pandemic retreats . Profit rose by a third, closing a year when the company’s annual profit increased by nearly $36 billion from 2020, surpassing Goldman Sachs Group Inc. and Visa Inc. of 2021 combined.

The company also said it would do a 20-for-1 split of its stock. The move comes on the heels of Apple Inc and Tesla Inc splitting their own shares in 2020.

The quarterly sales profit the company has recorded is the lowest for a three-month period since the end of 2020 and marks a decline from the 41% growth reported in the July-to-September quarter. Moderate growth has divided investors, with some optimistic Google will pick up its momentum in the coming year as Covid-19 and travel return, while others fear TikTok will dent YouTube’s video dominance and grow. The cost will cut the margin.

The split is evident in the company’s stock performance this year. After rising 65% last year, shares fell more than 10% in January amid a broader market sell-off. Shares were up about 8% after Tuesday’s trading.

The results were the first in a series to come from the tech’s major advertising companies. Facebook parent Meta Platforms Inc. Will report on Wednesday and Snap Inc. will post the results on Thursday.

The biggest threat to Google comes from regulators in the US and Europe who are suing and proposing legislation to curtail its dominance. In the US, the company faces separate antitrust lawsuits against its ad-tech, search, and app-store businesses, as well as state cases for claims it misrepresented customers’ location information. has collected. It also faces proposed legislation that would limit tech companies’ ability to favor their own businesses, as well as a new bill led by Sen. Mike Lee (R., Utah) that would allow it to rebrand its ad-tech unit. will be forced to sell.

At best, according to analysts, the challenges will plague the company with legal fees and discourage acquisitions that could attract regulators. In the worst case, the company may be forced to take down some business units in order to comply with judicial rulings or new laws.

Alphabet chief executive Sundar Pichai said he urged Congress to take its time on potential legislation, noting the importance of avoiding “unintended consequences.” online, and to avoid hurting “American competitiveness by only hurting US companies”.

The 20-to-1 stock split will make Google shares more accessible to a wider range of investors by lowering the price tags of individual shares. In Alphabet’s case, this would convert each share worth approximately $2,753 into 20 shares valued at $138.

A similar split by Apple and Tesla was credited with helping to extend a rally in share prices for those companies.

Much of Google’s growth over the past year has come from more e-commerce advertisers eager to reach customers whose product searches begin online. When the pandemic required that local businesses expand into e-commerce, Google partnered with Shopify Inc. to make search listings and ad purchases easier for millions of merchants. partnered with.

Total ad sales rose a third to $61.24 billion in the December quarter. YouTube was a major contributor, with sales of $8.63 billion, bringing in a total of $28.85 billion in sales for the year, about $850 million less than streaming-media subscription service Netflix Inc.

As the Internet’s largest video destination, YouTube now records 15 billion views per day, the company said. The stage maker has leaned into its position at the forefront of the economy, abandoning efforts to create premium shows in favor of nurturing domestic stars like MisterBeast. It plans to spend big in the coming year to maintain its superiority in video by adding a TikTok alternative, YouTube shorts and live shopping.

“YouTube has created this new generation of entrepreneurs and celebrities who are attracting more and more audiences,” said Mike Frazier, president of Bedell Frazier Investment Counseling. Advertisers covet it.”

Google has been pressured by investors to diversify beyond a digital-advertising business, which still accounts for more than 80% of total sales. The company has invested heavily in building out a cloud-computing division that is based on established players Amazon.com Inc. and Microsoft Corp. which have a market share of 41% and 20% respectively.

To boost its 6% market share, Google has taken equity stake in companies such as CME Group Inc. in exchange for long-term cloud contracts. This strategy helped drive Google’s cloud sales by 45% to $5.54 billion over the period. However, costs contributed to the cloud business and recorded a loss of $1.45 billion for the period.