Despite being one of the biggest online advertising giants, Google’s ad business is still growing at a rapid clip.
Google (GOOGL)’s ad sales grew nearly 33% year-over-year to $61.2 billion during the three months ending in December, and contributed to an overall better-than-expected quarter for its parent company, Alphabet.
The company on Tuesday reported quarterly profit of $20.6 billion, or $30.69 per share, on revenue of $75.3 billion, well ahead of what Wall Street analysts had projected.
Alphabet stock rose as much as 8% in after-hours trading following the announcement Tuesday.
The ad sales increase comes after the business had already experienced rapid growth in recent quarters as people spent more time online while stuck at home during the pandemic — and businesses spent more money on online ads to reach them there. Those same trends only appear to be making Big Tech even bigger at a time of mounting scrutiny on its power and impact on society.
“It is clear that many advertisers have switched their investment to search and display ads online and this isn’t a short-term trend, it’s a new reality,” Tom Johnson, global chief digital officer at media agency Mindshare Worldwide, said in emailed comments.
Beyond the core ad business, Alphabet’s other units also had a strong quarter. The company’s Pixel smartphones hit a quarterly sales record during the all-important holiday period, Alphabet CEO Sundar Pichai said, despite supply constraints caused by the global semiconductor shortage. (Google does not break out a Pixel sales figure.)
Google’s cloud business, a growing focus for the company, posted revenue growth of 45%, though it lost $890 million. The company’s cloud sales force has more than tripled since 2019, executives said on a conference call with analysts Tuesday.
The strong end to the year helped Alphabet’s total annual sales hit $257.6 billion, the first time it has topped the $200 billion mark.
There were some red flags in the report, however. Google’s traffic acquisition costs, the amount it spends to get users onto its platforms, rose by around $3 billion during the quarter, a “concerning” trend “that Alphabet will not want to see continuing,” Johnson said.
Revenue from the company’s “Other Bets” segment, which includes its self-driving car effort Waymo, also posted a slight year-over-year revenue decline to $181 million and a loss of nearly $1.8 billion.
Pichai also commented during the earnings call on a range of proposed bills being considered in Congress that aim to crack down on the dominant power of Big Tech companies. One such bill, approved the Senate Judiciary Committee last month, would bar large tech companies from preferencing to their own products or services on their platforms. If passed, the bill could prohibit Google from listing results from Google Maps at the top of its search page, for example.
“We are open to sensible, updated regulations. It’s important that technology is beneficial to society,” Pichai said. “On some of the current proposals … there are areas where we are genuinely concerned that they could break a wide range of popular services we offer to our users, all the work we do to make our products safe, private, secure and, in some cases, can hurt American competitiveness by disadvantaging solely US companies.”
The company on Tuesday also announced a 20-for-1 stock split, to be executed on July 15. The move, which would make shares more affordable and could improve liquidity for Google, is pending shareholder approval.