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Alphabet (Google) share price: 3 things we learnt from Q4 results

Alphabet’s share price fell in after-hours trade following the release of Q4 results that undershot a number of key analyst expectations.

Alphabet share price: a revenue miss

When we previewed Alphabet's now-reported Q4 earnings mid-last week, we pondered whether the internet behemoth would beat or miss analyst expectations.

Here we noted that analysts were expecting $38.40 billion in revenue from Alphabet – excluding Traffic Acquisition Costs (TAC).

Disappointingly for investors, and as Bloomberg reported today, Alphabet missed on Q4 revenue targets (on an ex-TAC basis).

Here, Google posted ex-TAC Q4 revenues of $37.57 billion, against estimates of $38.40 billion, according to Bloomberg Data.

Google Search & Other continues to be the largest revenue driver for the company, contributing $27,185 billion in sales during the quarter.

YouTube advertising contributed $4,717 billion to the Group’s overall Q4 revenue.

An operating income miss

On the bottom-line, the company also missed some key estimates: posting Q4 operating income of $9.27 billion – against analyst estimates of $9.79 billion. Alphabet also saw its operating margin deteriorate somewhat during the quarter, reporting Q4 operating margins of 20% – against analyst estimates of 24.7%.

In saying all this, earnings per share (EPS) did come in higher during the quarter, with Alphabet reporting Q4 EPS of $15.35 per share, against analyst estimates of $12.50 per share.

With these misses in mind, Alphabet saw its stock come off in after-hours trade – dropping as much as 5.16% – to a low of $1,409 per share – in just a couple of hours.

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Though likely a disappointment for shareholders, the Alphabet (GOOG) share price has been a strong performer over the last year, rising ~30% in that period.

In the last five years Alphabet’s (GOOG) share price has risen around 177%.

Management commentary at a glance

Though GOOG has stumbled in after-hours trade, the company, relative to its size (with a ~$1 trillion market capitalisation) continues to tout ‘strong’ revenue growth.

As Ruth Porat, the company’s Chief Financial Officer said:

‘In 2019 we again delivered strong revenue growth, with revenues of $162 billion, up 18% year over year and up 20% on a constant currency basis.’

Looking to provide further transparency on the nature of the business – Sundar Pichai, Alphabet and Google’s Chief Executive said:

‘I’m really pleased with our continued progress in Search and in building two of our newer growth areas — YouTube, already at $15 billion in annual ad revenue, and Cloud, which is now on a $10 billion revenue run rate.’

Looking at future opportunities, Mr Pichai additionally said:

‘Our investments in deep computer science, including artificial intelligence, ambient computing and cloud computing, provide a strong base for continued growth and new opportunities across Alphabet.’

Alphabet currently has 41 Buy recommendations, five hold recommendations and 0 sell recommendations, according to Bloomberg Data.

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