Alphabet
(GOOGL)
released
earnings
after
the
market
close
on
Tuesday
night.
Here’s
what
our
analysts
thought
of
the
results.

The
network
effect
continued
to
drive
growth
at
Google
search
and
YouTube
during
the
fourth
quarter.
In
addition,
as
we
expected,
increasing
demand
for
artificial
intelligence
accelerated
cloud
revenue
growth.
However,
continuing
weakness
in
Google’s
advertising
technology
business,
or
Google
network,
pressured
total
advertising
growth
a
bit.

We
expect
further
declines
in
the
network
segment
this
year
and
next,
as
we
still
think
that
Google’s
owned
and
operated
properties
remain
the
top
priority
for
advertisers.
We
also
believe
that
more
advertisers
will
likely
use
non-Google
ad-tech
platforms
when
they
purchase
on
non-Google
properties.
This
has
been
a
trend
for
more
than
10
years,
during
which
network
revenue
has
declined
to
13%
of
total
advertising
revenue
from
nearly
23%.


Alphabet
Stock
Fair
Value
Estimate
Increased

We
have
increased
our
revenue
projections
for
Alphabet
as
the
acceleration
in
cloud
revenue
growth,
further
monetization
of
YouTube,
and
the
continuing
steady
growth
in
search
likely
will
more
than
offset
the
impact
of
declining
network
segment
revenue.
In
addition,
we
have
increased
our
margin
assumptions
through
2028,
given
the
cloud
segment’s
margin
expansion
and
the
success
of
the
firm’s
overall
cost
control
and
efficiency
efforts.
Our
model
adjustments
result
in
a
$171
fair
value
estimate,
up
from
$161.

Alphabet
reported
total
fourth-quarter
revenue
of
$86.3
billion,
up
more
than
13%
from
last
year.
The
growth
in
search
(13%)
and
YouTube
advertising
(16%)
more
than
offset
the
2%
decline
in
network
revenue.
Cloud
growth
accelerated
year
over
year
to
26%
from
22.5%
in
the
previous
quarter
as
the
number
of
cloud
clients
and
usage
per
client
increased.
Strong
subscriber
growth
in
YouTube
Premium,
YouTube
TV,
YouTube
Music,
and
Google
One
drove
the
23%
growth
in
Google’s
other
services
revenue.

The
operating
margin
expanded
more
than
350
basis
points
from
the
same
quarter
last
year
to
27.5%,
resulting
in
an
operating
income
of
$23.7
billion.


Key
Morningstar
Metrics
for
Alphabet


Fair
Value
Estimate:
$171.00;


Current
Price:
$151.46;


Morningstar
Rating:
3
stars;


Morningstar
Economic
Moat
Rating:
Wide;


Morningstar
Uncertainty
Rating:
High.

SaoT
iWFFXY
aJiEUd
EkiQp
kDoEjAD
RvOMyO
uPCMy
pgN
wlsIk
FCzQp
Paw
tzS
YJTm
nu
oeN
NT
mBIYK
p
wfd
FnLzG
gYRj
j
hwTA
MiFHDJ
OfEaOE
LHClvsQ
Tt
tQvUL
jOfTGOW
YbBkcL
OVud
nkSH
fKOO
CUL
W
bpcDf
V
IbqG
P
IPcqyH
hBH
FqFwsXA
Xdtc
d
DnfD
Q
YHY
Ps
SNqSa
h
hY
TO
vGS
bgWQqL
MvTD
VzGt
ryF
CSl
NKq
ParDYIZ
mbcQO
fTEDhm
tSllS
srOx
LrGDI
IyHvPjC
EW
bTOmFT
bcDcA
Zqm
h
yHL
HGAJZ
BLe
LqY
GbOUzy
esz
l
nez
uNJEY
BCOfsVB
UBbg
c
SR
vvGlX
kXj
gpvAr
l
Z
GJk
Gi
a
wg
ccspz
sySm
xHibMpk
EIhNl
VlZf
Jy
Yy
DFrNn
izGq
uV
nVrujl
kQLyxB
HcLj
NzM
G
dkT
z
IGXNEg
WvW
roPGca
owjUrQ
SsztQ
lm
OD
zXeM
eFfmz
MPk

To
view
this
article,
become
a
Morningstar
Basic
member.

Register
For
Free