Google-parent Alphabet reported December-quarter earnings and revenue that topped analyst estimates and announced a 20-for-1 stock split, sending Google stock up on Wednesday.
Alphabet reported fourth-quarter earnings after the market close on Tuesday. The 20-for-1 stock split takes effect after the close of business July 15, if shareholders approve. According to a Barron's report, the stock split could pave the way for the tech giant to enter the Dow Jones Industrial Average.
Meanwhile, in 2022 GOOGL stock faces tough year-over-year comparisons.
"We expect smaller beats in 2022 as search growth slows and operating expenses increase," said Bank of America analyst Justin Post in a report.
He added: "However, versus peers, Alphabet has more earnings stability, more potential exposure to an ongoing rebound in local and travel verticals, evidence of artificial intelligence advantages across the product stack and a management team doing more for shareholders (buybacks and now stock splits)."
In the fourth quarter, internet search advertising revenue came in above expectations. But Google's cloud-computing unit and YouTube ad revenue slightly missed estimates. The company repurchased $13.5 billion of Google stock in the fourth quarter, up from $12.6 billion in the September quarter.
"Being lead by the digital economy's most powerful cash-generating business model (search) has its benefits, especially in a time of investor rotation to proven durability," BMO Capital Markets analyst Daniel Salmon said in a note to clients.
GOOGL Stock: Equity Investments Boost Earnings
GOOGL stock rose 7.5% to close at 2,960 on the stock market today. Google stock had gained over 10% earlier. From a technical view, investors should look for a new base to form.
Google earnings under generally accepted accounting principles, also known as GAAP, jumped 38% to $30.69 per share, including a $2.84 per-share gain in equity investments. Depending on how the Nasdaq fares in 2022, Google's gains on equity investments might reverse, said a recent UBS report.
Also, gross revenue rose 32% to $75.33 billion in the quarter ended Dec. 31.
In addition, analysts had estimated Google earnings of $27.68 per share on gross revenue of $72.3 billion.
Google Stock: YouTube Revenue Light
The company said net revenue — minus traffic acquisition costs — came in at $61.90 billion vs. estimates of $59.25 billion. Traffic acquisition costs jumped 28% to $13.43 billion.
Internet search and other revenue rose 36% to $43.30 billion vs. estimates of $40.95 billion. Google said cloud-computing revenue rose more than 45% to $5.54 billion vs. estimates of $5.57 billion. Google cloud cut its operating loss to $890 million, missing estimates of a lower $758 million loss.
Microsoft's Azure cloud business turned in a stellar fourth quarter by comparison.
Meanwhile, YouTube advertising revenue rose 25% to $8.63 billion. Analysts had estimated YouTube ad revenue of $8.81 billion.
Alphabet expects a "meaningful increase" in 2022 capital spending, reflecting investments in computer servers in internet data centers and construction of office space.
Heading into the Google earnings report, the stock had shed 5% in 2022 amid volatility in the Nasdaq. GOOGL stock holds a Relative Strength Rating of 86 out of a best-possible 99, according to IBD Stock Checkup.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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