Google parent company Alphabet for the first time gave investors a look at revenue for two key businesses: YouTube and Google Cloud. The video platform generated $15 billion in ad sales in 2019, up 36% from $11 billion the year before. Cloud revenue was $8.9 billion for the year, up 53% from $5.8 billion in 2018.
Alphabet on Monday announced financial results for the fourth quarter of 2019, and it marks the company’s first earnings report since Sundar Pichai took over as CEO of Alphabet, in addition to already running Google. The personnel change, however, didn’t make much of a difference. Pichai, along with CFO Ruth Porat, had been presiding over Alphabet’s earnings report and conference call for years. Google co-founders Larry Page and Sergey Brin made the announcement in early December, so the decision is also unlikely to have impacted the company’s performance for the quarter.
The last three months have seen a bout of change at Alphabet. Page and Brin stepped aside after 21 years. Legal Chief David Drummond retired amid controversy over personal relationships at the company. And Alphabet for the first time became a trillion-dollar company. The tech giant joins Apple, Amazon and Microsoft as the only US companies to have reached that threshold.
Google is also facing the most tumultuous period of its more than two-decade existence. The search giant is dealing with antitrust investigations from both state and federal officials. And members of its workforce are in open revolt, protesting Google’s work in China, treatment of contractors, and handling of sexual harassment allegations against senior executives.
On Monday, Pichai had mixed news to share with investors. In the quarter ended Dec. 31, Alphabet tallied $46.07 billion in sales, missing analyst estimates of $46.94 billion, the company said Monday. Earnings per share were $15.35, exceeding expectations of $12.53 per share, according to Thomson Reuters.
“Our investments in deep computer science, including artificial intelligence, ambient computing and cloud computing, provide a strong base for continued growth and new opportunities across Alphabet,” Pichai said in a statement.
Alphabet’s stock fell more than 4% in after-hours trading.
Cloud Computing: Long-awaited YouTube numbers
In recent years, YouTube has become a more important part of Alphabet’s business, as people begin to search for things from more places than Google’s homepage. But the platform, which has more than 2 billion visitors a month, has also become a major source of controversy for Alphabet. YouTube has been trying to rid the site of content that promotes extremism and child exploitation. On Monday — the day of the Iowa caucuses — the company outlined a plan for dealing with disinformation as the US heads into the 2020 election season.
On a conference call with analysts, Pichai also provided a glimpse at YouTube’s subscription business. He said YouTube Music and Premium have a total of 20 million paid subscribers. YouTube TV, the company’s cord-cutter service, has 2 million subscribers in the US.
“When you look at the fact that people are consuming a lot of goods and services as part of their experience in YouTube, how can we create better commerce experiences also is a big opportunity for us,” Pichai said.
Google’s cloud business has also been a big focal point for the company. But the cloud operation has drawn blowback, too. Two years ago, Google workers protested the company for a cloud contract with the Pentagon for a project called Maven. The initiative uses artificial intelligence to improve the analysis of drone footage. After the protests, Google said it wouldn’t renew the contract.
The search giant also hinted at a slide in its consumer hardware business, though the company didn’t provide specific numbers. CFO Ruth Porat mentioned “declining hardware revenue,” referring to Google’s spate of branded devices, including the Pixel phone, Nest Mini smart speaker and Google Wi-Fi router.
The year in Alphabet (2019)
Originally published Feb. 3, 1:19 p.m. PT.
Update, 3:35 p.m.: Adds more info from the conference call.