Alphabet profit sends shares up; overtakes Apple in value

Mon Feb 1, 2016 8:17pm EST
 
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By Deborah M. Todd and Anya George Tharakan

(Reuters) - Alphabet Inc easily beat Wall Street's quarterly profit forecasts on Monday, helped by strong mobile advertising sales, sending the shares of Google's parent higher in after-hours trading to surpass Apple Inc as the most valuable U.S. company.

For the first time, the company disclosed the profitability of Google's search engine and its other online services, and how much it is spending on ambitious technology projects such as self-driving cars.

The numbers were lapped up by investors, who saw room for growth in Google's traditional business, and were relieved to see that spending on new projects it calls 'Other Bets' was not as lavish as some had feared.

"It's pretty interesting that 80 percent of YouTube views come from outside of the United States. I didn't think it would be that high," said Kevin Kelly, managing partner at Recon Capital. "It demonstrates that the value of YouTube can continue to be extracted," he said.

The operating profit margin for its Google unit was 31.9 percent in the most recent quarter, compared to 25 percent for Alphabet.

Alphabet spent $869 million on capital expenditures for the Other Bets in 2015, up from $501 million in 2014. It has not made any projections about if or when those bets cumulatively would become profitable.

"As long as the core business continues to operate well with accelerated revenue... investment in those businesses can continue," said Ronald Josey of JMP Securities.

The company said consolidated revenue jumped 17.8 percent to $21.33 billion in the fourth quarter ended Dec. 31, from $18.10 billion a year earlier. Analysts had expected $20.77 billion, according to Thomson Reuters I/B/E/S.   Continued...

 
Letters spell the word "Alphabet" as they are seen on a computer screen with a Google search page in this photo illustration taken in Paris, France, August 11, 2015. REUTERS/Pascal Rossignol