Google parent Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) delivered better-than-expected fourth-quarter financial results to end the 2018 year on a high-note.
The search giant extended its trend of generating consistent growth for another quarter, Alphabet reported consolidated revenue that climbed to $39.3 billion, up 22% year over year (23% in constant currency), and topping analysts’ consensus estimates of $38.98 billion.
Profitability was similarly robust, with the company reporting operating income of $8.2 billion up 21% compared to the prior year quarter. Diluted earnings per share came in at $12.77, up 12% year over year, and well above the $10.86 expected by Wall Street.
Image source: Google.
Investors were looking for reassurances that escalating traffic acquisition costs (TAC) — the payments Google makes to partners for directing users to its search — were finally under control. TAC remained level at 23% of Google ad revenue, similar to the year-ago period (24%), though investors may have been hoping for more improvement.
Paid clicks jumped 66% year over year, but cost-per-click, which illustrates how much Google makes on each ad, declined by 29% year over year, as the adoption of less-expensive YouTube ads increased.
Google’s “other revenues” segment, which includes the company’s cloud computing, hardware sales, and Google Play, continued to grow quickly, producing revenue of nearly $6.49 billion, up 31% compared to the prior-year period.
“With great opportunities ahead, we continue to make focused investments in the talent and infrastructure needed to bring exceptional products and experiences to our users, advertisers and partners around the globe,” said Ruth Porat, Chief Financial Officer of Alphabet and Google.
Alphabet’s stock was down slightly in the wake of its report, falling about 3% in the after-hours market. Long-term investors should look beyond the short-term market noise to the massive opportunities that lie ahead.