Alphabet reported Google’s 2018 results late Tuesday. Here’s what Computer Business Review took home from the conference call.
1) Alphabet is a Money-Making Machine
Net income more than doubled in 2018 on the previous calendar year, rising to $30.7 billion from $12.6 billion. Revenues through the calendar year were $136.8 billion, against $110.855 in 2017. Alphabet is a juggernaut.
CFO Ruth Porat described the growth as “reflecting the benefit of our ongoing investments to deliver exceptional experiences for users and compelling returns for our advertisers, partners and enterprise customers.”
2) … but That’s Getting More Expensive
Total cost of revenues was $17.9 billion, up a hefty 26 percent year-on-year.
What’s getting expensive? In short, data centres are, content acquisition costs for Youtube are and hardware costs for its Nest family of products are.
But the most expensive thing? Good engineers.
As Ruth Porat put it: “The biggest increase was in R&D expenses, with the main driver… our ongoing investment in engineers, in particular, in Google.”
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She added: “In certain Other Bets, employees are compensated through equity-based programs. And that’s because we believe that this alignment of interest is valuable.”
3) Google Cloud… Seems to be Doing OK?
Alphabet doesn’t break out figures for Google Cloud Platform. (These were rolled into Cloud, Hardware and Play, totalling $6.5 billion, up 31 percent year-on-year).
Sundar Pichai said the company “more than doubled both the number of Google Cloud platform deals over $1 million as well as the number of multiyear contracts signed.”
GCP has a number of key strengths and Google was keen to play them up.
These are, in short, its development of and expertise in container orchestration (Kubernetes) and Machine Learning (TensorFlow).
Both have contributed to a number of recent client wins, including, as Pichai noted, the UK’s Telegraph, which is going all-in on GCP.
4) How About Some M&A?
Google has been speculatively linked with a number of potential future acquisitions. In reality, M&A activity has been well below that of its peers, despite its cash pile doubling over the past five years to a whopping $109 billion.
Jefferies LL’s Brent Thill asked CEO Sundar Pichai what was holding him back.
“We have a very high bar, and so to me it’s been more about us finding the right fit rather than being constrained by anything in particular. But I do think it’s always an important part of our strategy and we’ve done great acquisitions in the past… We continue to look for opportunities ahead.”
5) Google Assistant is Booming
A demonstration at Intel’s AI DevCon last month by Roberto Pieraccini, Director for Engineering, Google Assistant demonstrated the huge strides Google is making with its assistant in terms of natural language processing and hugely sophisticated AI. 2018’s numbers show the results on the ground.
Over the past year the Google Assistant has expanded from eight languages and 14 countries to nearly 30 languages and 80 countries. In that time, the number of active users has quadrupled.
AI is critical to Alphabet’s long-term outlook; the thread that runs through search and advertising, cloud, autonomous driving, healthcare and its other bets. As a public testing ground for Google’s AI-first strategy and example of the appetite for intelligent voice-search, it looks set to pay off.
