Google Disappoints After Revealing YouTube’s $15 Billion Revenue

Alphabet has posted a strong set of fourth quarter and annual financials, which for the first time detailed the revenue performance of its YouTube business, coupled with its Cloud division.

Yet despite the strong growth, the figures for these divisions disappointed investors in Wall Street and shares in the firm fell 4.5 percent in extended trading to $1,416.

Alphabet last month achieved a market capitalisation of $1 trillion, making it the fourth US company to reach that significant financial milestone. It came after the markets reacted favourably when co-founders, Larry Page and Sergey Brin announced in December they were stepping down from leadership roles, leaving Google CEO Sundar Pichai to take the role as CEO of Alphabet.

Strong performance

An examination of the latest financials from Alphabet has revealed a company in rude health, with strong fiscal performance.

For the fourth quarter ending 31 December, Alphabet posted a net profit of $10.7bn, up from a profit of $8.9bn in the same year-ago quarter.

Total revenues for the quarter were $46.1bn from $39.3bn a year earlier.

And there was equally good news when the annual results are examined.

Annual profit at Alphabet were up at $34.3bn, from $30.7bn in 2018.

Annual revenue for 2019 meanwhile was $161.8bn, up from $136.8bn in 2018.

“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,” said Alphabet and Google CEO Sundar Pichai.

“I’m really pleased with our continued progress in Search and in building two of our newer growth areas – YouTube, already at $15 billion in annual ad revenue, and Cloud, which is now on a $10 billion revenue run rate,” he said.

Disappointed analysts

Google’s advertising is the main money maker for Alphabet, but it also broke down the performance of its Google Cloud and YouTube divisions.

This proved to be a double edge sword for Alphabet, as investors realised that Google Cloud and YouTube was in reality smaller than they had generally assumed.

Google Cloud for example grew its annual revenues from $4bn in 2017, to $5.8bn in 2018, to $8.9bn in 2019.

But analysts fretted that it is some distance behind market leaders Amazon AWS and Microsoft Azure.

YouTube meanwhile turns over more money (but it has to share that figure with content generators), as it made $8.1bn in annual revenues in 2017, $11.1bn in 2018, and an impressive $15.1bn in 2019.

However, the $15bn YouTube annual revenue disappointed investors, after some analyst estimates had placed its annual turnover as high as $25bn.

YouTube now has about 2 million paid subscribers, Pichai said.

For comparison sake, Amazon recently said it has 55 million music subscribers, while Apple last year revealed it had 60 million such subscribers.

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