SAN RAMON, CALIFORNIA (AP) – Google’s digital advertising empire turned in another strong performance during the holiday shopping season, propelling a 36 per cent increase in its corporate parent’s profit during the final three months of 2021.
The results announced on Tuesday underscore how technology giants have adapted to become even more successful during a nearly two-year pandemic that has roiled much of the economy.
In a show of confidence intended to make its shares more affordable, Google parent Alphabet also announced plans for its first stock split since 2014. If approved, the proposed 20-for-one split will reduce the price for each share this July while keeping Alphabet’s market value intact. Alphabet’s stock surged nearly nine per cent in extended trading after the news came out.
Google stumbled during the early stages of the pandemic in 2020, leading to its first year-over-year decline in quarterly revenue.
But as government-imposed lockdowns led people to order more takeout and shop more online, Google’s dominant online ad network became even more of a magnet for merchants trying to connect with consumers corralled at home. “Helping them thrive is more important than ever,” Alphabet CEO Sundar Pichai told analysts during a conference call.
In last year’s October-December period, Google raked in USD61.2 billion in ad sales, a 33 per cent increase from the same period in the previous year.
As usual, Google’s ad business accounted for the bulk of Alphabet’s profits. The Mountain View, California, company earned USD20.6 billion, or USD30.69 per share, well above the average estimate of USD27.66 per share from analysts surveyed by FactSet Research.
Revenue rose 32 per cent from the previous year to USD75.3 billion, eclipsing analysts’ predictions for revenue of USD72.3 billion.
The impressive numbers pushed Alphabet’s share price near USD3,000 in extended trading. If the stock is still hovering around that price at the time of the proposed stock split, the shares would be reset at about USD150 apiece, for a cut of 95 per cent. But Alphabet’s market value, now approaching USD2 trillion, would remain unchanged because the number of outstanding shares would be 20 times greater than now.
Lowering the per-share price of Alphabet’s stock could set the stage for the company to be added to the bellwether Dow Jones Industrial Average after the split is completed, predicted CFRA Research analyst Angelo Zino. That’s what happened with Apple not long after the iPhone maker executed a seven-for-one stock split in 2014.
In 2021, Google’s ad revenue topped USD200 billion for the first time in the company’s 23-year history. Last year’s ad sales of USD209.5 billion represented a 55 per cent increase from the USD134.8 billion posted in 2019 – the last full year before the pandemic changed everything.