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Google's advertising business is up 22%

4 February 2021
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2 min.
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Google's advertising business is up 22%

Google's business

Shares in Alphabet (GOOGL, GOOG), up 29.4% over the past year, rose 7% after the close of trading on Tuesday when the company released its fourth-quarter financial report.

Key cues for investors were strong growth in advertising revenue, proving that demand for digital advertising has continued to recover quickly in the face of the coronavirus pandemic. Also significant was Google's first disclosure of operating losses for its Google Cloud computing unit, showing that this business is still in investment mode.

Alphabet reported a 45% increase in Q4 earnings per share to $22.30, up $6.31 from analysts estimates of $15.99. Earnings were $15.2bn, up from $10.7bn a year earlier.

Total quarterly revenue rose 23% (from last year's value) to $56.9 billion, which was also above the average analyst estimate of $53.15 billion.

Google advertising

Google's advertising business, including YouTube, accounted for 81% of Alphabet's record quarterly sales to $46.20bn, up 22% from $37.93bn in the same quarter last year. It signals a significant improvement from the second quarter, when Alphabet posted negative overall revenue growth for the first time due to a blow to business during the onset of the pandemic. Growth also strengthened from the previous third quarter, meaning that the digital advertising market's recovery is gaining momentum.

YouTube advertising revenues showed a sharp 46% increase to $6.89 billion year-on-year as the service became one of the world's most popular during the pandemic. At the same time, Google has to allocate a significant amount for traffic attraction (TAC) $10.47bn.

Google Cloud revenue

Google Cloud's revenues rose 47% from the same quarter in 2019 to $3.83bn, slightly below analysts forecast of $3.81bn.

The company has released figures showing that Google Cloud is still incurring losses due to investments in expanding its data centres, with the company losing $5.61bn for the full year 2020 and $1.24bn for the fourth quarter.

The Other Bets division posted a loss of $1.136 billion in the fourth quarter and $4.476 billion for the full year 2020.

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