Alphabet unveils YouTube’s huge advertising revenue for the first time but disappoints Wall Street

Alphabet unveils YouTube’s huge advertising revenue for the first time but disappoints Wall Street, Google’s parent company, on Monday (February 3rd) reported mixed results for the final quarter of 2019, as the group first unveiled revenue from YouTube and its cloud business. These results were the first by Sundar Pichai, now at the helm of Alphabet and Google since December, and the operational withdrawal of founders Sergey Brin and Larry Page. They retain control of the company.

Alphabet’s revenue was slightly below expectations at $46.075 billion (up 17% year-on-year), where analysts had expected $46.9 billion, due to declining advertising revenue in the final three months of the year. In total, for the full year 2019, Alphabet generated revenue of almost $162 billion for a net profit of $34.3 billion.

But more importantly, Alphabet has finally offered much-anticipated financial details about its YouTube and Google Cloud business. For example, ads and subscriptions on YouTube generated revenues of $4.7 billion in the quarter and $15.15 billion for the full year (up 36% year-on-year) — $3 billion came from the subscriptions launched in 2018, $15 billion is nine times the amount paid by Google to acquire the platform in 2014.

Google Cloud, meanwhile, reported revenue of $8.9 billion last year, up 53% from the previous year. The sector is currently dominated by Amazon followed by Microsoft. “We are very pleased with the momentum we are seeing in the cloud,” said Sundar Pichai.

‘Four key areas’ of investment in 2020
In contrast, Google’s search and other activities posted revenues of $98.1 billion in 2019, a smaller 15% increase over 2018. Despite earnings per share well above analysts’ expectations of $15.35 versus $12.74, Factset calculated, this did not change investors’ minds. The stock was down more than 4.4% at 0030 GMT in post-market electronic trading.

If confirmed on Tuesday, it will leave the $1 trillion market valuation club it entered a few weeks ago. “We will always promote a long-term vision,” Sundar Pichai said during the conference call with financial analysts. A way to respond to Wall Street that tends to focus its attention on short-term results.

“Our investments in computer science, including artificial intelligence, ambient computing (voice assistants, etc.) and outsourced computing, provide us with a solid foundation for further growth and new opportunities everywhere at Alphabet,” said the new boss.

The new boss detailed “four key areas” for fiscal year 2020:

Create the most useful products.
Improve privacy and user safety.
Better interaction and integration of resources.
create value over the long term.

“We intend to increase our investments in both technical infrastructure and our offices in 2020 compared to 2019,” Porat warned.
These investments will focus on machine learning in all of our activities, as will the cloud, the search engine, ads and YouTube, the CFO said.

The number of employees will increase at a “slightly more” pace than the 20% growth of 2019, she added. In addition to recruiting to support priority investments, the acquisition of Fitbit, the portable connected products brand acquired in November 2019 for $2.1 billion, will also boost Alphabet’s employee stakes.

 

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