Tuesday, April 23, 2024

Google blasts analysts’ forecasts with rebound in ad spending

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An unexpected increase in advertising in the last few months of last year has pushed Google earnings way above Wall Street forecasts and raised shares of parent company Alphabet by 8% in post-trade. Tuesday market.

A holiday shopping season fueled by a pandemic dominated by e-commerce, with a partial return from advertisers who were hit hardest in the health crisis, led to one of the company’s best quarters in years, with revenue up 23%.

The rebound ended a volatile year that saw the Google Internet activity – which represents more than 99% of Alphabet’s turnover – suffered its first quarterly decline, before a recovery that defied the most optimistic expectations.

Alphabet’s revenue grew 13% for the full year, even as non-digital sectors of global advertising business contracted by around 20%.

A new reliance on e-commerce by retailers was behind the recovery, as advertisers were forced to rely heavily on digital forms of advertising to reach consumers and drive sales. But the past quarter also saw companies in hard-hit industries like travel start to advertise more actively after a drought in the previous six months.

The rebound fueled a 22% increase in Google ad revenue in the last quarter. It was a huge improvement from the 10 percent in the third quarter of last year and the 8 percent contraction in the second. It also comfortably exceeded the 16% growth rate seen over the whole of 2019, before the pandemic struck.

Overall, Alphabet reported revenue of $ 56.9 billion, about $ 3.8 billion more than most analysts had expected in the quarter. Earnings per share reached $ 22.30, compared to the expected $ 15.90. Profits reached $ 15.35 per share a year earlier, when profits were bolstered by the lack of a tax burden after Alphabet resolved an unspecified tax audit.

The company also revealed the performance of its cloud division for the first time, posting an operating loss of $ 1.24 billion last quarter and $ 5.6 billion for the full year. These figures are the latest in a series of disclosures that began a year ago, breaking with past practice to give investors a more detailed look at Alphabet’s various businesses.

In addition to a loss of $ 4.5 billion from the company’s “other bets” – which include what it calls moonshot projects, such as driverless cars – Alphabet committed more than $ 10 billion in red ink to its new businesses last year, compared to operating profit of $ 54.6 billion in search and YouTube.

The cloud division’s growth accelerated by two percentage points in the last quarter, with revenue up 47% to $ 3.8 billion. That was almost matched by the growth rate of YouTube advertising, which rose 46% to $ 6.9 billion, well ahead of the 32% growth seen in the previous three months.

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