Alphabet Inc reported earnings which beat analyst estimates and the stock of the tech giant is now up 5.29% to $791.79 in after hours trading. The company is now neck and neck with Apple for the highest market cap of any US based stock. On the call Alphabet management stated:
Let me conclude with some comments about our continuing transformation of Alphabet.
As Larry articulated in the 2013 founders letter and then again when announcing the creation of Alphabet, incrementalism in technology leads to irrelevance over time because change tends to be revolutionary, not t evolutionary. This belief was the impetus for our organizational structure which enhances focus on opportunities within Google and across Alphabet, while also pushing our leaders to extend the frontier that we are addressing. Consistent with the move to Alphabet, we expanded transparency internally regarding the expenses and CapEx required in each business, which benefited our 2016 budgeting process and capital allocation decision making. As part of this process, we established technical and business targets for a number of the businesses to set the appropriate pace of investment.
We made necessary choices to align resources with those efforts that maximize the potential for long-term value creation, prioritizing certain efforts while making tough calls in others. Given the fact that we are innovating in a number of exciting industries and some areas the optimal execution path could encourage accelerated investment.
In others, we continue to receive interest in exploring partnerships or alternate approaches to commercializing our efforts.
Is a great example of where we formed strategic partnerships with companies like decks com, J&J, Novartis and Sanofi in order to accelerate our efforts.
My main point here is that we remain on a journey and it is still early days.
We are working diligently to build additional businesses that create long-term revenues, profits, and value.
Before the call SIG analysts predicted:
Our 4Q paid search checks suggest solid trends on the back of strong mobile spend growth driven primarily by clicks growth, though the mobile CPC gap appears to be narrowing (for some verticals like travel, we are hearing that mobile CPCs may be higher than desktop). RKG (Merkle) noted that Google ad spend was up 21% y/y (accelerating from 18% y/y in 3Q), iProspect commented that Google ad spend was up 26% y/y (also a nice acceleration from ~2% y/y in 3Q), a third agency noted that spend was up 20% y/y (accelerating from 15% y/y in 3Q), and a fourth agency saw 15-18% y/y growth in 4Q (relatively consistent with 16.5% y/y in 3Q).
Cantor analysts predicted:
In one of the most anticipated earnings calls this season, Alphabet will not only report 4Q:15 results, which we expect to be strong, but also provide segment reporting for Google “core” and “Other Best”. While we had hoped that the company would also break out Search and Display, this exercise should nonetheless unveil revenue, profitability, capital intensity and return on capital for both segments, and help with valuing the two parts of the business distinctly. Operationally, our intra-quarter checks show acceleration in overall search ad spend, driven by mobile spend and clicks. We’re maintaining a BUY rating and $880 PT.
Reacting to the earnings UBS analysts noted:
Google reported Q4 2015 gross revenues of $21.33b (compared to our est. of $21.25b and Street est. of $20.78b). Google Sites gross revenue was $14.94b (compared to our estimate of $14.73b) for growth of 20% YoY. Networks gross revenue was $ 4.14b (compared to our estimate of $4.19b) for growth of 7% YoY. Google Other revenue was $2.10b for growth of 24% YoY. For FY ’15, ‘Other Bets’ revs came in at $448mm; the operating loss for Other Bets was $3.57b (excl. stock based comps). Q4 Adj. EBITDA: Google reported adj. EBITDA of $8.22b (compared to our estimate of $8.02b and Street of $8.20b). Adj. EPS: Google reported EPS of $8.67 (compared to our est. of $7.87 and Street of $8.10). Alphabet repurchased $1.8bn of class C stock, (from its 5.1b share buyback program announced last quarter). In January 2016, the board authorized the company to repurchase an addl. 514 thousand shares, with a total remaining authorization for future purchases of approximately $3.7 billion.