Google parent Alphabet Inc topped quarterly sales expectations for its advertising and Cloud businesses, helped in part by the pandemic, and said it will resume big spending on hiring and facility construction.
Alphabet shares jumped about 8% to $2,067 in extended trading.
Google, which generates more revenue from internet advertising than any other company, benefited from lockdowns that drove retail and other clients online, helping offset cutbacks by travel and entertainment advertisers.
Google's chief executive Sundar Pichai told analysts that Google’s products and support have been a lifeline for millions of small medium businesses hit hard by the pandemic.
Alphabet’s 2020 sales growth of 13% was the slowest increase since 2009 when it posted 8.5% growth. Still, matched with spending cuts, Alphabet increased its cash hoard by $17 billion in 2020 to $137 billion.
With coronavirus vaccines deployed and advertising spending on the uptick, the company hopes to return to expanding the Google Cloud business with staff and data centers and incorporating artificial intelligence into more services.
In a new disclosure, Alphabet said Google Cloud posted an operating loss of $1.24 billion in the fourth quarter and a $5.6 billion loss for 2020, about 21% steeper than 2019’s annual loss.
Google has long faced questions over whether it can spin the cash from its advertising business into a newly profitable venture. Pichai acknowledged that reaching that goal may take some time.
Aided by $3 billion in unrealized startup investment gains, Alphabet’s fourth-quarter profit rose 43% to $15.2 billion, or $22.30 per share, beating estimates of $15.95 per share.
Google’s advertising business, including YouTube, accounted for 81% of Alphabet’s record $56.9 billion in quarterly sales, which rose 23% compared with a year ago.
Cloud sales, also benefiting from the pandemic, were $3.83 billion, or $13.1 billion for the full year, up 46% from 2019.
Analysts tracked by Refinitiv had estimated quarterly revenue of $53.1 billion and Cloud sales of $3.82 billion.
Alphabet said it expects a $2.1 billion boost to operating results in 2021 after a new assessment extended the useful life of its servers and networking gear by a year or more.