Google’s parent company, Alphabet Inc. (NASDAQ: GOOGL) reported its fourth quarter financial results during Monday’s aftermarket hours. The tech giant topped estimates in both earnings and revenue, however, shares edged lower due to advertising prices and increasing expenses.
For the fourth quarter, Google reported earnings of USD 12.77 per share on revenue of USD 39.28 Billion. Refinitiv analysts estimated earnings of USD 10.82 per share on revenue of USD 38.93 Billion.
Despite Google seeing its revenue increase by 22% year-over-year, the Company saw its cost-per-click fall by 29% year-over-year and 9% sequentially. Paid clicks on Google properties increased by 66% year-over-year.
Total traffic acquisition costs (TAC) for the quarter was USD 7.43 Billion, which missed analysts’ estimates of USD 7.62 Billion.
The lower-than-expected traffic acquisition costs resulted in a lower operating margin. Google reported a quarterly operating margin of 21%, missing expectations of 22% as well as declining from 23% the previous year’s quarter.
Google’s advertising revenue increased to USD 32.63 Billion compared to USD 27.22 Billion the same quarter last year. Google’s advertising business is the primary driver for its revenue, accounting for almost 84% of its quarterly revenue.
Google’s other revenues segment or its non-advertising unit reported sales of USD 6.49 Billion. The unit includes its Play Store, cloud computing, and other hardware. The segment increased compared to sales of USD 4.96 Billion the same quarter last year.
Google also saw its capital expenditures in the quarter increased to USD 6.85 Billion, increasing from USD 3.81 Billion in the year-earlier quarter. For the full year, the Company saw its capital expenditures nearly double to USD 25.46 Billion.
“We’re investing aggressively in our newer businesses within Google, particularly Cloud and hardware, as [Google Chief Executive Sundar Pichai] has already said,” Porat said in the earnings call, according to MarketWatch. She added that Google is “investing in engineers,” along with sales and marketing hires, with “the increased head count to support not just ads, but in particular, Cloud.”