Alphabet ignores small market shocks with record results

The massive growth in digital advertising has driven record revenues at Alphabet and Google

Google parent company Alphabet reported a record end to the 2021 financial year this week, buoyed by growth from the advertising and cloud businesses.

The firm declared a net income of $20.6 billion on $75.3 billion revenue at the end of fiscal Q4, up 35.5 per cent and 32 per cent year on-year, respectively. Full-year 2021 net income was $76 billion (up 88.6 per cent) on $257.6 billion (up 41 per cent) of revenues.

The majority of revenue ($69.4 billion with $26 billion operating income) came from the Google Services busines segment. This segment includes products like Google Search, Android, Chrome, YouTube and so on, with more than 80 per cent of revenue coming from advertising. Analysts pointed to the growth in digital advertising worldwide as a primary growth accelerator.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said, "The pandemic has handily accelerated the world's reliance on digital advertising. Sitting through traditional TV advert breaks or reading billboards suddenly feels completely archaic in the age of streaming and mobile phone addiction."

Alphabet's other main business segment, Google Cloud, consists of Google's infrastructure and platform services, collaboration tools, and other services for enterprise customers. Revenues here were $5.5 billion (up 44.6 per cent YoY), with an operating loss of $890 million: a 28 per cent improvement on last year's $1.2 billion loss. The Cloud segment is now exploring how to support clients that want to use blockchain, CEO Sundar Pichai told analysts.

Alphabet's results are further proof that Big Tech firms have profited from the Covid-19 pandemic and the global move towards a digital economy. Organisations like Alphabet, Microsoft and Amazon have been relatively unaffected by market pressures such as rising inflation, Covid variants and supply chain shortages; in fact, Pichai even highlighted a quarterly sales record for the company's Pixel phones, "despite supply constraints." However, lawsuits around the world accusing Google of anticompetitive practices remain one of the company's biggest challenges.