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By Brian Nelson, CFA
On February 4, Alphabet (GOOG) (GOOGL) reported mixed fourth quarter results with revenue missing the consensus forecast, but GAAP earnings per share outpacing what Wall Street was looking for. Total revenue in the fourth quarter advanced 12%, while operating income leapt 30.7% (thanks to a five percentage point improvement in its operating margin) and net income jumped 28.3%. Diluted earnings per share rose 31.1%, to $2.15 per share, in the quarter. We continue to like Alphabet as a top weighting in the Best Ideas Newsletter portfolio.
Management had the following to say about the quarter:
Q4 was a strong quarter driven by our leadership in AI and momentum across the business. We are building, testing, and launching products and models faster than ever, and making significant progress in compute and driving efficiencies. In Search, advances like AI Overviews and Circle to Search are increasing user engagement. Our AI-powered Google Cloud portfolio is seeing stronger customer demand, and YouTube continues to be the leader in streaming watchtime and podcasts. Together, Cloud and YouTube exited 2024 at an annual revenue run rate of $110 billion. Our results show the power of our differentiated full-stack approach to AI innovation and the continued strength of our core businesses. We are confident about the opportunities ahead, and to accelerate our progress, we expect to invest approximately $75 billion in capital expenditures in 2025.
Google Search and other revenue advanced 12.5% in the quarter on a year-over-year basis, while YouTube ads increased 13.8%. Total Google advertising revenue increased 10.6% in the quarter year-over-year. Total Google Services revenue edged 10.2% higher, while Google Cloud revenue increased 30% from the same period last year. Alphabet ended the quarter with $95.7 billion in total cash and marketable securities and long-term debt of $10.9 billion, good for a robust net cash position. Net cash provided by operating activities soared to $39.1 billion in the quarter versus $18.9 billion in the year-ago period. Free cash flow in the quarter was $24.8 billion, up from $7.9 billion in last year’s quarter.
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Brian Nelson owns shares in SPY, SCHG, QQQ, QQQM, DIA, VOT, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, QQQM, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, RSP, SCHG, QQQ, QQQM, and VOO. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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