Alphabet, the parent company of Google, saw its stock value skyrocket after it delivered a better-then-expected fourth quarterly earnings report. This was added to with the news that Google would implement a 20-for-1 stock split that would be due to start on July 15. All of which will be enough to keep Google among the very select club of $2 trillion market cap companies.
The quarterly earnings report showed that Google’s revenues were $75.33 billion compared to the $72.17 billion that had been estimated. This was a revenue growth of 32%. Earnings per share in Google also enjoyed positive growth of 38% up to $30.69 billion compared to the $27.34 billion that analysts had expected.
Much of Google’s success was due to the rapid growth seen in the internet search advertising revenues that came in way above expectations. This was enough to cause Google’ share price to rise by as much as 9% during extended trading hours.
However, it wasn’t all good news for Alphabet. The quarterly earnings report revealed that Google’s cloud computing division hadn’t reached analyst’s estimates and YouTube’s advertising revenues only reached $8.63 billion compared to the $8.87 billion that analysts had expected. YouTube is currently locked in a battle with TikTok in a bid to boost its 15 billion daily active users.
Positive signs for Alphabet
The fact that Alphabet reported a revenue growth of 32% was spectacular news given the context of an overheating economy and a lingering pandemic. 2021 in general proved to be yet another outstanding year for the brand. After all, the stock price of Google soared by 65% last year. This made the brand easily the best-performing stock of the ‘big tech’ brands and it made three-times the gain of the S&P 500.
The quarterly earnings report will have been especially warmly greeted as Google started 2022 with its stock price falling over 6% after a large sell-off of tech stocks. This was largely a market move away from ‘riskier’ assets in light of the expected interest rate changes and inflationary background.
It’s Google’s advertising revenue that is keeping things rosy for the tech brand. With a 33% rise in advertising revenue, Google has clearly made itself attractive to the retail sector in order to achieve such positive year-on-ear advertising growth.
The 20-for-1 stock split is also significant as it means that Alphabet could eventually enter the Dow Jones Industrial Average. Such a move would mirror that of Apple and Tesla who have both split their stock over the past few years. This has the benefit of lowering the overall share price in a way that doesn’t affect the rest of the business. Google’s stock price at the time of writing was $2,752.88 and the split would see it trading at $128.64.
