Babar Khan Javed
Feb 5, 2018

Google achieves revenue milestone

Alphabet continues to reinvest in Google's advertising solutions and connected services for the enterprise space.

A Google store on the company's Mountain View, CA, campus. (Source: Shutterstock)
A Google store on the company's Mountain View, CA, campus. (Source: Shutterstock)

Good news, bad news.

Alphabet, Google's parent company, reported a net loss of $3.02 billion for Q4 2017 due to a tax hit, while annual revenue for 2017 was $110.8 billion, up from $90.2 billion in 2016.

Without the tax hit, the profit for Q4 2017 was $6.84 billion, representing a 21.15% profit margin.

Revenue was primarily driven by Google's advertising business, with $27.7 billion in the fourth quarter, where paid clicks rose by 43% and the aggregate CPC fell by 14%.

Google's experimental R&D arm, known in the P&L as "other bets", reported an operating loss of $916 million for the quarter which is $174 million better than the previous year. The ventures under this category are Waymo, Nest, and Verily. These experienced a $200 million increase in revenue as well.

The overall loss this quarter can be attributed to the rising costs of doing business, with operating expenditure rising with Alphabet spending

  • $16.6 billion on R&D,
  • $6.45 billion in traffic acquisition costs, paid to 
  • $12.9 billion on the channel strategy and marketing activities

The final quarter played an integral role, with the company pushing out Google Cloud and Google hardware and raising awareness on new integrations. Hardware products and cloud services contributed $4.69 billion in revenue, a 37% increase from the previous year.

As it tries to take on Oracle, Microsoft, Amazon, and other incumbents in the cloud business, Google's CEO, Sundar Pichai, reported that the cloud portfolio generated $1 billion for the company in Q4 2017.

“We believe that Google Cloud Platform is the fastest growing major public cloud provider in the world,” Pichai said.

During the earnings call, Ruth Porat, Google's CFO, said that YouTube and Google’s Pixel and Home hardware offerings are promising revenue opportunities beyond advertising.

With expectations from the Thomas Reuters consensus anticipating earnings per share of $9.98, actual results fell short at $9.70.

Alphabet also announced that Eric Schmidt would be replaced by John L. Hennessy, who has been on the board since 2004, adding that it would initiate an $8.6 billion share buyback. 

Trading at $1,119 per share, Alphabet's market cap now stands at $773 billion.

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