Google (Alphabet) Q4 2021 Earnings Report Recap

GOOGL beat on earnings and revenue

Key Takeaways

  • Google's traffic acquisition costs missed analyst estimates, coming in higher than expected.
  • Traffic acquisition costs essentially gauge the amount Google pays to get people on its website and to keep them there.
  • Google's board of directors has approved a 20-for-one stock split.
Google (Alphabet) Earnings Results
Metric  Beat/Miss/Match Reported Value Analysts' Prediction
EPS Beat $30.69 $27.14
Revenue Beat $75.3B $72.1B
Traffic Acquisition Costs Miss $13.4B $12.9B

Source: Predictions based on analysts' consensus from Visible Alpha

Google (Alphabet) Financial Results: Analysis

Alphabet Inc. (GOOGLGOOG), parent company of Google, on Feb. 1 reported Q4 FY 2021 earnings and revenue that exceeded analyst expectations. Earnings per share (EPS) came in above what analysts were forecasting, rising 37.6% year over year (YOY). Revenue also beat analyst estimates, up 32.4% compared to the year-ago quarter. The company said that its revenue growth reflected strength in advertiser spending, consumer online activity, and ongoing growth in Google Cloud revenue. Google's traffic acquisition costs came in at $13.4 billion, disappointing expectations. The company's shares were up more than 7% at one point in extended trading. Over the past year, Alphabet's shares have provided a total return of 45.4%, well above the S&P 500's total return of 20.5%.

GOOGL Traffic Acquisition Costs

Google's traffic acquisition costs rose 28.3% YOY, faster than expected but a significant deceleration from the past two quarters. Traffic acquisition costs are a critical component of the company's overall cost of revenue. Google's search access points and services are made available to internet users by the company's distribution partners, such as browser providers, mobile carriers, original equipment manufacturers, and software developers. Traffic acquisition costs comprise fees paid to these distribution partners as well as amounts paid to the company's network members, mostly for advertisements displayed on those members' websites. They are essentially costs Google must pay other websites to acquire more traffic on its own sites.

While Google's revenue has grown quickly recently, it is important to keep an eye on how fast its costs are rising as well. If costs rise faster than revenue, then its earnings growth may not be sustainable.

GOOGL Stock Split

Google announced that its board of directors had approved a 20-for-one stock split in the form of a one-time special stock dividend on each share of the company's class A, class B, and class C stock. The stock split must still obtain approval from the company's shareholders. If approved, each stockholder as of the close of business on July 1, 2022, will receive a dividend of 19 additional shares after the close of business on July 15, 2022.

GOOGL Earnings Call Recap

In an analyst call after results were released, Chief Executive Officer (CEO) Sundar Pichai said that Alphabet’s backlog rose more than 70% to $51 billion, primarily consisting of the cloud business, Pichai said the company saw 65% year-over-year (YOY) growth in the number of cloud deals worth over $1 billion.

Alphabet's next earnings report (for Q1 FY 2022) is anticipated to be released on April 25, 2022.

Article Sources
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  7. Yahoo! Finance. "Earnings Calendar: GOOGL." Accessed Feb. 1, 2022.

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