A hét részvénye: Alphabet (Angol hír)

• Alphabet released Q4 2020 results on Tuesday

• Record sales and profit

• New reporting structure

• Margins in cloud business continue to improve

• Stock jumped 7% after earnings

Share price of Alphabet (GOOGL.US) jumped 7% yesterday following the release of an upbeat earnings report for Q4 2020. Company reported significant improvement in business in the final quarter of a pandemic-hit year with record sales and profits. Alphabet also decided to change the reporting structure for investors to have better visibility of results in key segments.

Headline results

Alphabet reported Q4 2020 earnings results after close of the Wall Street session on Tuesday. Company reported a 23.5% YoY increase in revenue, to $56.898 billion, as well as 10.1% YoY jump in net income, to $10.999 billion. Adjusted earnings per share were 12.1% YoY higher at $16.11. While revenue was 5% higher than median estimate, net income missed expectations by 14.1%. Company said that solid performance in the quarter was driven by Search and YouTube, units that benefit from stay-at-home orders. Ad revenue from YouTube increased 46% YoY to $6.9 billion while revenue from Search unit jumped 17% YoY to $31.9 billion.

New reporting structure

Alphabet started publishing sales and operating income data for 3 segments. Data in USD millions. Source: Alphabet, XTB

Investors were awaiting the release as Alphabet hinted that it will include changes to how results are reported. The company decided to start reporting revenue and operating income data for 3 segments:

• Google Services - including Search, advertising, YouTube, Chrome and Google Play

• Google Cloud - including results from infrastructure and data-analytics platforms

• Other Bets - including driverless car project Waymo among others

Data provided by the company showed, unsurprisingly, that Google Services is the main driver of sales in the company and accounted for almost 93% of revenue in Q4 2020. Moreover, breakdown showed that two other segments generate operating loss with Other Bets segment being the biggest drag on profit due to high R&D spending. Data for the Google Cloud showed that segment continues to expand quickly.

Margin in Google Cloud continue to improve

Google Cloud results. Margins in the Google Cloud segment continued to improve in 2020. However, the segment remains unprofitable. Data in USD millions. Source: Alphabet, XTB

Ad revenue makes up a bulk of Alphabet sales and it should not come as a surprise that CEO Sundar Pichai tries to diversify business with cloud computing. Cloud has been quickly expanding even before 2020 and coronavirus pandemic has only boosted the pace. While Alphabet still trails companies like Amazon or Microsoft in the field (both with over $40 billion in cloud revenue in 2020), it has managed to improve results of the Google Cloud segment significantly in recent periods. Sales in the segment increased over 46% in full-2020 following almost 53% increase in 2019. While operating loss deepened in each of those years, scale was much smaller than scale of increase in sales. As a result the company managed to improve operating margin significantly. A point to note is that expansion is set to continue as Alphabet managed to win cloud orders from companies like Vodafone, Etsy or Wayfair.

Alphabet (GOOGL.US) jumped 7% following a solid earnings release and reached an intraday all-time high above $2,100 mark yesterday. However, bulls failed to hold onto these gains until the session's end and pulled back slightly. The stock is expected to launch today's trading more or less flat. Return above $2,100 could be a good omen for the bulls and could hint at continuation of the upward move towards the mid-term target at 261.8% exterior retracement of September 2020 correction ($2,250 area). On the other hand, in case the stock starts to move lower there are two near-term levels to watch - lower limit of the Overbalance structure at $1,958 and previous swing level coinciding with 161.8% exterior retracement at around $1,925. Source: xStation5