Google owner Alphabet has revealed precisely how much money it makes from Cloud, Search, and Youtube for the first time – a decision that was welcomed breathlessly by investors on an earnings call late Monday.
With new CEO Sundar Pichai (the Google leader also took over as Alphabet CEO in December) clearly intent on more transparency, the enhanced disclosure on revenue details, fleshed out in the call, was welcomed by Goldman Sachs’ analyst as “the best Google call or Alphabet call I have been on.”
Shares fell four percent as markets closed.
Here’s what it revealed.
“A Timeless [Money] Machine”
Pichai – who thanked outgoing Alphabet founders Larry Page and Sergey Brin for creating a “timeless machine” in his introduction to the earnings call – said continued investments provide “a strong base for continued growth and new opportunities across Alphabet”.
Some headline figures for the last quarter of 2019:
- Q4 Google Search revenues hit a colossal $27 billion.
- Q4 Youtube Advertising revenue grew to $4.7 billion.
- Q4 Google Cloud revenue were $2.6 billion.
Full year 2019 Google Search revenues outstripped those of Google Cloud Platform (GCP) by 1100 percent, despite the latter’s $10 billion run rate – the two earning Alphabet $98 billion and $8.9 billion respectively for the calendar year.
The first break out of Youtube’s earnings dominated many headlines today, with Alphabet’s quarterly report showing that the video platform drove over $15 billion in advertising revenue. Pichai noted: “People can now easily buy products in YouTube’s home feed and search results making it possible for advertisers to reach even more audiences… this is the format people love.”
Alphabet ended 2019 with full year net income of $34 billion.
GCP Plans to Triple Size of Sales Force
Sundar Pichai was keen to flag up the outlook for GCP, saying: “Google Cloud ended 2019 at a more than $10 billion run rate, up 53 percent year-on-year, driven by significant growth in GCP. The growth rate of GCP was meaningful higher than that of Cloud overall and GCP’s growth rate accelerated from 2018 to 2019.”
Alphabet CFO Ruth Porat meanwhile emphasised the company’s bullish cloud expansion, saying: “We’re investing aggressively focused on building out our go-to market capabilities, executing against our product roadmap and extending the global footprint of our infrastructure focused on 21 markets and six industries.
She added: “We’ve set a goal to triple the size of the sales force.”
All the expansion isn’t coming in cheaply: Alphabet’s cost of revenues on a consolidated basis was $12.5 billion, up 19 percent year-over-year, “primarily driven by Google-related expenses” which Porat attributed to “costs associated with our data centers and other operations”, followed by YouTube content acquisition costs.
Google’s CapEx for the quarter was $6.6 billion, reflecting “investments in data centers followed by servers and office facilities.”