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On Monday evening Alphabet a.k.a. Google posted their Q4 numbers. Revenue came in at $46.1 billion, up 17%, and Net Income came in at $10.7 billion, up 22%. In terms of analyst expectations, it was a top-line beat but a bottom-line miss. The stock dropped 2.5% on the results.
The big news from these results is that Alphabet was more open about how they make money, breaking out things like Youtube and Cloud numbers. The graph below shows how well Youtube has performed for the group. Converting those numbers to ARPU, average revenue per user, it only comes to $8 a year per user. That is not much, and shows that there is still growth potential for Youtube. Currently, Youtube has two billion users, up 500 million in the last three years. In the coming years, there are a couple billion more people who can become users.
You will find more infographics at Statista
The one concern from analysts was the slowing growth in the main part of the business - ad sales. Google is getting to a point where the market is saturated with ad's, meaning that the bulk of future profits needs to come from attracting more people to their platform. To do that they are committing resources to ensure that they stay the best search engine around. The main job of a search engine is to answer questions that you have. So to improve search results, Google uses AI technology allowing a better understanding of what you are asking, and then serve an appropriate answer.
Other less prominent parts of the business are the likes of Google Cloud and Waymo, the self-driving car division. In the case of Google Cloud, revenues came in at $2.6 billion, up 54%. It is a division that also has huge potential for the future. Then for Waymo, analysts speculate that it could be worth as much as $135 billion. Nice.
Google might be a tech company, but it has been around for 21 years, and has two very established brands in Google and Youtube. I think it is safe to call this a 'blue chip' stock? Something that needs to be part of your portfolio.