Alphabet Reports Rising Profits at Core Google Businesses--Update

By Alistair Barr 

Alphabet Inc. reported new numbers showing the profitability of its main Google Internet businesses surged last year.

The new disclosures, reflecting a corporate reorganization late last year, showed revenue at Google's core Internet businesses--including search, YouTube and Android--rose 13.5% in 2015 to $74.54 billion. Yearly operating income for these businesses totaled $23.4 billion, excluding stock-based compensation, up 23% from $19.01 billion a year earlier.

Alphabet adopted the new structure, and agreed to disclose additional financial details, in part to respond to investor calls for more transparency as Google branched into new fields like health care, transportation and communications. Monday, Alphabet for the first time reported revenue, operating income and other metrics for both its main Google businesses and for a group of moonshots it calls "Other Bets," such as self-driving cars.

For the fourth quarter, the company--as a whole--reported better-than-expected results.

Alphabet's net income in the December quarter totaled $4.92 billion, or $7.06 a share, up from $4.68 billion, or $6.79 a share, in the same period a year earlier. Excluding certain expenses, profit came in at $8.67 a share. On that basis, analysts expected Alphabet to earn $8.10 per share, according to Thomson Reuters.

Revenue increased 18% to $21.33 billion, which was above the average analyst estimate of $20.8 billion, according to Thomson Reuters. Revenue from Google's core businesses gained 18% to $21.18 billion.

Shares of Alphabet rose 5.5% to $813.99 in after-hours trading.

The new numbers showed that the profitability of Google's core has increased in recent years, excluding the impact of spending on the moonshots.

Alphabet's Other Bets generated revenue of $448 million last year, up 37% from 2014. This moonshot segment lost $3.57 billion last year, compared with a loss of $1.94 billion in 2014.

Over the past year, Alphabet shares have climbed more than 43% as its Google business improved mobile search ads and cut costs, putting it within striking distance of overtaking Apple Inc. to be the world's most valuable company. Apple shares have fallen roughly 18% in the same period, amid slowing growth in sales of its main product, the iPhone.

Alphabet Chief Executive and co-founder Larry Page had been searching for big new businesses that can take over the growth mantle from its online search money machine. This has produced a complex company that has struggled to manage so many different projects.

In contrast, Apple has focused on a few core products, making the company easier to manage. However, this has left it vulnerable to fluctuations in demand for iPhones.

During the fourth quarter, Alphabet repurchased 2.4 million shares at a total price of $1.8 billion.

Write to Alistair Barr at [e-mail]

(END) Dow Jones Newswires

February 01, 2016 16:51 ET (21:51 GMT)

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