Despite growing Silicon Valley tech layoffs, and disappointing third quarter performance from Apple and Twitter, Google’s parent, Alphabet, reported an annual 20 percent revenue surge, 25 percent earnings spike, and 10,000 additional employees.
Following the announcement that the company hit $22.1 billion in revenue and $5.1 billion in profit, Alphabet’s chief financial officer, Ruth Porat, commented, “Mobile search and video are powering our core advertising business.”
Alphabet (NASDAQ:GOOG) substantially exceeded Wall Street’s $8.63 quarterly per-share earnings estimate, with a $9.06 gain.
Google’s business model has been criticized recently, because the value of search-based advertisements on mobile was once not as high as on desktop computers. Google’s per-click-cost charged to advertisers has fallen by 11 percent, year-over-year.
But with more of the search business migrating to mobile, the aggregate number of Google paid clicks actually increased 33 percent year-over-year.
Breitbart News has been reporting that Silicon Valley tech firms have hemorrhaged jobs in 2016. According to global outplacement consultancy Challenger, Gray & Christmas, Inc., which tracks employment terminations at large organizations, major Silicon Valley tech firms through July 2016 had cut 62,917 positions — up 71 percent over the 36,881 during the same seven months in 2015.
Challenger reported that the computer industry continued to slash jobs in September, with 4,152 terminations. That brought “the annual job-cut total for the sector to 59,719, which is second only to the energy sector, which has announced 98,733 job cuts.” But if Challenger had not designated the 8,000 job losses due to the closure of ITT Technical Institute as education cuts, computer job losses would have been much higher.
Mizuho Securities tech analyst Neil Doshi told SiliconValley.com that he was impressed that as long as Alphabet continues “to innovate on the ads front on the mobile front” and “mobile queries continue to grow,” he expects the company to see continued strength.
With eMarketer Pro estimating Google will control 57 percent of all worldwide search-ad enquiries in 2017, Doshi believes Google’s cloud business could be a “nicely competitive moat they will have built.”
Alphabet’s stock spiked on the earnings announcement by almost $30 per-share, to a new all-time high on October 27 of $826.90 in after-hours trading. But with Google’s investment thesis undermined by the huge spending in the company’s “Other Bets,” Alphabet’s stock fell back to $795.37 by the close of trading the next day.
Wall Street analysts usually refer to “Other Bets” as a grab bag of futuristic businesses that includes smart gadget maker Nest, life sciences research organization Verily, and the Fiber ultra-high-speed Internet provider. Although Other Bets’ quarterly revenue grew by over 50 percent, to $197 million, they still had a quarterly operating loss of $865 million.
But unlike many Silicon Valley tech leaders that have been cutting jobs in 2015 and 2016, Alphabet increased its head count by 16 percent, or 10,000 new employees. That did not stop Alphabet — with $7.3 billion in free cash flow for the quarter, and $83 billion of cash on the balance sheet — from announcing it will buy back another $7 billion in stock.