Google owner Alphabet beat analysts’ expectations for profits for the fourth quarter as well as for the entire of 2019 while missing out on estimates of revenue. And despite the company announcing the results after the closure of the markets, its shares were down 4 per cent in after-hours trading.
Alphabet reported expansions in revenue for the fourth quarter at $46.1 billion compared to $39.3 billion in the same period a year ago. It also grew its net income in the quarter to $10.7 billion compared to $8.9 billion in the same quarter of 2018.
The results of the company for the fourth quarter are notable for a number of reasons.
The first important aspect is the breaking down of the advertising empire of YouTube. The second, the company also disclosed the revenue for Google Cloud business – both of which were a first for the company.
The revenues accounted for by YouTube’s advertising, as disclosed by the company, came in at $15.1 billion in 2019 compared to $11.2 billion for the previous year.
Apparently, all of the cloud computing efforts of the company are included in the new “Google Cloud” line item issued by the company. While the advertising revenues from YouTube is of interest to investors, the breakup of the cloud computing revenues of the company are also equally important if not more.
The total revenues generated by the cloud services of Google for the quarter came in at $2.6 billion and includes revenues from its G Suite, the enterprise version of GMail/Docs/Drive/Hangouts and Google’s cloud infrastructure. In comparison, the revenue from the cloud services in the same quarter a year ago was $1.71 billion.
The company had reported a total of $1 billion quarterly revenue for the group in February of 2018 and the then-Google Cloud CEO Diane Greene seemed to have been pleased with the performance. But within a very short time, the cloud revenues doubled to cross $2 billion for that quarter last July which put the business unit on an $8 billion run rate – double of the previous reporting made by the company. .
Last year, after Greene stepped down, his position was taken up by former Oracle executive Thomas Kurian. A number of industry veterans from Oracle and SAP was brought in by him into the company to boost the sale of its cloud services. And so far, the company has been able to churn out encouraging results within a short period of time.
However, compared with the encouraging performance of the cloud business of Google, the growth of similar businesses of its rivals has also been pretty impressive in the same time period.
For example, in the same calendar quarter, the cloud services of Amazon raked in revenues of just under $10 billion which is comparatively larger than that of Google in absolute terms. Google is doing a catch-up act and is apparently doing it quite successfully. It should be noted at this stage that the comparable cloud revenues of Amazon are more concentrated on infrastructure while Google’s is equally focused on services such as revenues generated from its SaaS cloud based service.
(Adapted from TechCrunch.com)