Alphabet Inc (GOOG)’s Shares Surge on Q4 Earnings Beat

Alphabet, Google

The shares of Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL), the parent company of Google surged after reporting better-than-expected financial results for the fourth quarter of 2015.

Alphabet’s Class A shares (GOOGL) closed $770.77 each and climbed further by more than 4% to $803.03 each during the extended trading. The company’s Class C shares (GOOG) closed $752 a piece, up 1.22% and further increased more than 5% to $791 each after-hours.

Alphabet fourth-quarter financial results

Alphabet reported an 18% increase in revenue to $21.33 billion, higher than the $20.77 billion expected by Wall Street analysts. Its adjusted earnings increased 28.3% to $8.67 per share, above the $8.10 consensus estimate based on data compiled by Thomson Reuters.

During the quarter, the company said its Google segment revenues were $21.2 billion. Google websites generated $14.9 billion, Google Network Members’ websites $4.1 billion, Google advertising revenues $19.1 billion and Google other revenues $2.1 billion.

The total traffic acquisition costs (TAC) as a percentage of Google’s advertising revenues were 21% during the quarter.  Its aggregate cost-per-click was -13% year-over-year. Its aggregate paid clicks were 31% YoY.

Alphabet has $73.07 billion in cash, cash equivalents, and marketable securities as of December 31. Its capital expenditures were $2.1 billion and free cash flow was $4.3 billion. The company said its effective tax rate was 5%.

Alphabet core business is healthy

In a statement, Alphabet CFO Ruth Porat said, “Our very strong revenue growth in Q4 reflects the vibrancy of our business, driven by mobile search as well as YouTube and programmatic advertising, all areas in which we’ve been investing for many years. We’re excited about the opportunities we have across Google and Other Bets to use technology to improve the lives of billions of people.”

Alphabet reported that its Other Bets recorded $448 million in revenues and operating loss of $3.57 billion for the twelve months ended December 31. Its capital expenditures for Other Bets were $869 million for the full year 2015.

Google CEO Sundar Pichai said, “Above all, our Q4 results show the great momentum and opportunity we have in mobile search and across Google’s range of businesses.”

Josh Olson, an analyst at Edward Jones & Co., said, “Alphabet’s core business looks very healthy. That’s going to build investors’ confidence about the other bets they’ve been making.”