GOOGL Q4 Earnings Beat Estimates, Shares Fall on Slowing Cloud Growth

Alphabet’s GOOGL fourth-quarter 2024 earnings of $2.15 per share beat the Zacks Consensus Estimate by 1.42%. The figure grew 31.1% year over year.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Revenues of $96.469 billion increased 11.8% year over year (16% at constant currency).Net revenues, excluding total traffic acquisition costs (“TAC”) (the portion of revenues shared with Google’s partners and the amount paid to distribution partners and others who direct traffic to Google’s website), were $81.621 billion, which surpassed the consensus mark by 0.30%. The figure rose 12.9% year over year.TAC of $14.848 billion rose 6.2% year over year.GOOGL shares were down more than 7% in pre-market trading on Tuesday, reflecting slowing Google Cloud revenues, which although surged 30.1% year over year to $11.955 billion and accounted for 12.4% of the quarter’s total revenues. The figure lagged the Zacks Consensus Estimate by 1.51%. Alphabet Inc. Price, Consensus and EPS Surprise Alphabet Inc. price-consensus-eps-surprise-chart | Alphabet Inc. Quote Google Cloud revenue growth benefited from strong GCP growth and strong demand for Artificial Intelligence (AI) infrastructure and generative AI solutions. Google Workspace grew due to an increase in average revenue per seat.GOOGL’s Services Rides on Search & YouTubeGoogle Services revenues increased 10.2% year over year to $84.094 billion and accounted for 87.2% of the total revenues. The figure beat the Zacks Consensus Estimate by 0.47%.Google advertising revenues rose 10.6% year over year to $72.461 billion and accounted for 75.1% of the total revenues. The figure beat the consensus mark of by 1.46%.However, Google Network revenues decreased 4.1% year over year to $7.954 billion but beat the consensus mark by 1.58%.Google subscriptions, platforms and devices revenues, formerly known as Google Other revenues, were $11.633 billion in the fourth quarter, up 7.8% year over year. The figure missed the consensus mark by 4.45%.Other Bets’ revenues were $400 million, down 39.1% year over year, and accounted for 0.4% of the fourth-quarter revenues. The figure missed the consensus mark by 33.77%.GOOGL Leverages AI to Boost Search RevenuesSearch and other revenues increased 12.5% year over year to $54.034 billion, surpassing the Zacks Consensus Estimate by 1.61%. Search and other revenues accounted for 64.3%, 74.6% and 56% of Google Services, Google Advertising and total revenues, respectively.Alphabet is leveraging AI boost search dominance. AI overviews powered by Gemini are now available in 100 countries while the Circle to Search feature is available on more than 200 android devices.Search revenues benefited from strong performance in the financial services (due to strength in insurance) vertical, followed by retail.Strong retail performance, particularly on Black Friday and Cyber Monday, which each generated more than $1 billion in advertising revenues, was a noteworthy driver of GOOGL’s search revenues.The introduction of an updated AI-powered Google shopping experience helped in attracting shoppers, as December 2024 saw roughly 13% more daily active users on a year-over-year basis. Travel benefited from higher spend on Travel Tuesday, with 20% year-over-year revenue growth for travel advertisers.Strong Spending on Election Ads Aids GOOGL’s YouTubeYouTube’s advertising revenues improved 13.8% year over year to $10.473 billion, beating the consensus mark by 0.71%. YouTube revenues in the reported quarter benefited from strong spending on U.S. election advertising.Alphabet’s strategy of continuing investments in AI capabilities is driving continued growth and watch time across YouTube’s ad- supported and premium experiences. Viewers globally streamed more than 1 billion hours of YouTube content daily on their TVs in 2024.Investments in podcasts areis also driving creators’ and viewers’ engagement. In 2024, people watched more than 400 million hours of podcasts each month on living room devices alone. According to Edison, YouTube is currently the most popular service for podcasts listening in the United States.Shorts is are also gaining traction. In 2024, the monetization rate of Shorts relative to in-stream viewing increased by more than 30%. Shorts are also and getting significant traction on connected TV, which now makes up 15% of shorts viewing in the United States.GOOGL’s Operating Margin Expands Y/YCosts and operating expenses were $65.497 billion, up 4.6% year over year. As a percentage of revenues, the figure declined 460 basis points (bps) on a year-over-year basis to 67.9%.Total cost of revenues increased 8% year over year to $40.6 billion. Tech expenses increased 6% year over year to $14.8 billion. Other cost of revenues increased 9% to $25.8 billion driven by higher content acquisition costs for YouTube.  The operating margin was 30.7%, which expanded 460 bps year over year.Segment-wise, Google Services’ operating margin of 39% expanded 410 bps year over year.Google Cloud’s operating income was $2.093 billion compared with $864 million reported in the year-ago quarter.Other Bets reported a loss of $1.174 billion compared with a loss of $863 million in the year-ago quarter.Alphabet’s Balance Sheet Remains StrongAs of Dec. 31, 2024, cash, cash equivalents and marketable securities were $110.916 billion, up from $93.23 billion as of Sept. 30, 2024.Long-term debt was $11.87 billion as of Dec. 31, 2024, compared with $12.297 billion as of Sept. 30, 2024.Alphabet generated $39.113 billion of cash from operations in the fourth -quarter of 2024 compared with $30.698 billion in the third -quarter of 2024. GOOGL spent $14.276 billion on capital expenditure, netting a free cash flow of $24.837 billion in the reported quarter.Solid liquidity is helping Alphabet maintain its dividend payout. In fourth-quarter 2024, GOOGL paid $2.4 billion in dividends and bought back shares worth $15 billion. In 2024, the company returned roughly $70 billion to shareholders.GOOGL’s Q1 to Suffer From Unfavorable ForexAlphabet expects first-quarter 2025 revenues to suffer from unfavorable forex and one less day of revenues in the current quarter compared with the year-ago quarter.Throughout 2025, Google Services and advertising revenues are expected to be negatively impacted by tough comparison due to strong financial service vertical performance in 2024.Google Cloud’s  growth rate is expected to be negatively impacted by capacity limitations.Alphabet expects to spend $75 billion in capital expenditures in 2025, with roughly $16 billion and $18 billion of debt in the first quarter of 2025. GOOGL expects depreciation expense and growth rate to increase in 2025.Alphabet expects headcount growth in 2025 due to investments in AI and cloud.Zacks Rank & Stocks to ConsiderAlphabet currently has a Zacks Rank #3 (Hold).BILL Holdings BILL, Twilio TWLO and DoorDash DASH are some better-ranked stocks in the broader Zacks Computer & Technology sector. While BILL and TWLO sport a Zacks Rank #1 (Strong Buy) each, DASH carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.BILL is scheduled to report its second-quarter fiscal 2025 results on Feb. 6. Twilio is set to report fourth-quarter 2024 results on Feb. 13, while DoorDash is scheduled to report its fourth-quarter 2024 results on Feb. 11.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Alphabet Inc. (GOOGL): Free Stock Analysis Report Twilio Inc. (TWLO): Free Stock Analysis Report BILL Holdings, Inc. (BILL): Free Stock Analysis Report DoorDash, Inc. (DASH): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks