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By: Aquib Nawab
Finance
Alphabet Inc. (GOOG 0.58%) (GOOGL 0.86%) recently experienced a significant stock price drop of nearly 8% on January 31, following the release of its fourth-quarter report.
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Alphabet's revenue for the quarter rose by 13% year over year, reaching $86.31 billion. This figure exceeded analysts' estimates by an impressive $1.04 billion. Additionally, the company's adjusted earnings per share (EPS) grew by 56% to $1.64, surpassing the consensus forecast by four cents per share.
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Alphabet's stock price has undergone significant fluctuations over the past 12 months. Despite the recent drop, the stock has rallied by approximately 45% during this period.
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In the fourth quarter, 76% of its revenue came from Google's advertising business. This business encompasses search, display, network, and YouTube ads. Moreover, the company witnessed accelerating revenue growth in all three of its core business segments.
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Google's advertising business is a crucial revenue driver for Alphabet. It demonstrated robust growth in the fourth quarter, primarily driven by the strength of search and YouTube ads, which offset weaker network ad performance.
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It generates revenue from subscriptions, platforms, and cloud services. Subscriptions like YouTube Premium, YouTube TV, and Google One contributed significantly to this segment's expansion. The cloud business also saw growth, attributed to the rollout of new artificial intelligence (AI) tools.
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In the competitive cloud computing landscape, Alphabet's Google Cloud division faces stiff competition from industry giants. Google Cloud currently holds a 10% market share, trailing behind Microsoft's Azure (25%) and Amazon Web Services (AWS) (31%), according to Canalys.
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Alphabet's full-year revenue growth for 2024 reached 9%, representing a slight slowdown from the previous year's 10% growth. Analysts project a further 11% revenue increase in 2024 and 10% in 2025.
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During the fourth quarter, Alphabet's operating margin expanded by three percentage points, reaching a noteworthy 27%. Over the full year, the operating margin improved by one percentage point to 27%.
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Analysts anticipate that Alphabet's operating margin will continue to rise, reaching 29% in 2024 and 30% in 2025. They also expect earnings per share (EPS) to grow by 16% in both 2024 and 2025, making Alphabet appear relatively more attractively valued compared to Microsoft and Amazon.
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