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Google Brings Alphabet Almost All Of Its Q4 Revenue

Joseph Tsidulko

Alphabet, the Mountain View, Calif.-based tech giant once called Google, beat investor expectations with solid fourth-quarter growth fueled by mobile searches and video advertising, the company announced in an earnings call Monday.

Google -- a subsidiary that encapsulates Alphabet's traditional Internet-focused businesses, including the emerging enterprise division -- drove almost the entirety of its holding company's fourth-quarter revenue.

Alphabet posted earnings per share of $8.67 -- 58 cents more than Wall Street expected -- sending its stock climbing roughly 5 percent in after-hours trading.

[Related: Google Cloud Services Game Changer: Partners Can Now Hold The Paper]

Sundar Pichai, Google's CEO, told investors that Google remains highly committed to its cloud business and believes the means to drive greater adoption in the highly competitive market is to build out the platform's feature set.

Selling public cloud services comes naturally to Google, thanks to its technological expertise and years of experience operating data centers hosting its own products, like Search and YouTube. That proficiency in optimizing resource use is why Google's cloud leads in computing price-verses-performance ratio, Pichai said.

Google continues to "take that knowledge and optimize it for all customers," Pichai said. But to succeed in the cloud market, a provider must offer "a breadth of feature requirements," and Google is working with customers to ensure that its platform delivers the tools they desire.

Alphabet, in its first earnings call as the new holding company, grouped its financials in the categories of "Google" and "other bets."

The company as a whole took in just over $21.3 billion in revenue in the fourth quarter, up 18 percent year over year, or 24 percent in constant currency. That revenue generated more than $5.3 billion in operating income.

Google accounted for roughly 98 percent of total sales. The subsidiary -- with a portfolio that includes Search, Play, Android and Google Cloud Platform -- saw $21.2 billion in quarterly revenue.

YouTube, with video advertising now powered by the TrueView ad format, saw sales spike.


The "other bets" companies and projects in the Alphabet portfolio -- Fiber connectivity, Next home automation, self-driving cars, two venture capital arms, Verily life sciences, and the secretive Google X research facility -- took in $448 million in revenue combined, up 37 percent from the previous year.

Google cut its capital spending in 2015, with $1.78 billion in outlays in the final three months of the year for data centers, production facilities and other capital projects.

Alphabet CFO Ruth Porat told investors the slowdown in spending came on the heels of a busy 2014. Google focused in 2015 on integrating and optimizing the investments it made the previous year, she said.

But capital expenditures again "will be increasing to support all that we're doing" in 2016, Porat said.

Google's focus is always on efficiency, according to the CFO, and the company now achieves three times the compute power it did five years ago for the same cost.

Pichai told investors that Google Cloud Platform is now "used and trusted by over 4 million applications."

The cloud business is getting "significant traction" and Google plans to invest heavily in it this year, said the CEO.

To that end, Google established a new cloud business unit late last year that's led by VMware co-founder and former CEO Diane Greene, Pichai noted.

"So we've been carefully taking customer feedback and addressing all those needs," Pichai said. "I think we're at the point right now where the product is meant to be used at scale."

The movement to cloud has reached a tipping point, Pichai said. Business leaders now believe their easiest, most cost-effective and secure option is to procure enterprise IT resources from the major cloud providers.

The Google executives also said that Gmail is their latest product to reach 1 billion users.

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