While the world and Wall Street focused on WallStreetBets and their attempt to corner various companies and markets (e.g., GameStop, AMC, silver), the big companies in the tech sector reported their last quarterly earnings. All of them have beaten expectations by a mile.
Two days ago, it was Google’s parent turn, Alphabet, to release its quarterly performance. Remember that when we look at performance indicators, we refer to the income statement, while when we interpret the financial position of a company, we should have a look at the balance sheet.
Revenues jumped 23.6% in the previous quarter, operating income grew by 69%, both having a strong impact on the $15.23 billion reported as net income (i.e., bottom line).
Highlights of Alphabet’s Q4 FY 2020 Earnings
The biggest surprise came from revenues that jumped well into the double-digit territory. The growth was spurred by a strong comeback of the YouTube and Search divisions, as more people consumed online products during the pandemic’s various lockdowns around the world. Also, Google Cloud contributed to the sharp increase in revenues as well.
As such, basic Earnings Per Share (EPS) reached $22.54 and diluted EPS $22.3. The difference between the two is important because it reflects the potential debt that, if converted, will dilute the basic EPS – the smaller the difference, the better for the overall earnings report.
All Google’s business segments gained last quarter – YouTube, advertising, cloud, other bets. The only loss that Google took was from hedging gains/losses, but it was insignificant to affect the overall results.
Unsurprisingly, investors rewarded the good results by sending the stock price to new highs. Google’s share price is already up +18.16% this year alone and +39.31% in the last twelve months. While it lags the overall performance of the tech sector, it is, perhaps, time for investors to re-consider Alphabet’s business model as it is one based on constant growth fueled by low debt levels.
Alphabet’s results come to complement the great earnings season for the tech companies – Facebook, Amazon, Microsoft, they all released similar, positive earnings. As such, the bid behind the Nasdaq 100 index continues, despite many claiming that a new tech bubble similar to the one in the year 2000 is on the horizon.