If the financial reports of the two giants of Microsoft and Apple have reassured the technology stocks in the "panic", then the fourth quarter of 2021 results just released by Google are the meaning of the two words "façade" exhausted.
After the US stock market on February 2, Beijing time, Google released its Q4 and full-year financial reports as of December 31, 2021. Revenues such as single-quarter revenue, EPS and the highly watched cloud business have exceeded analysts' consensus expectations. The growth of total revenue, profit and other indicators for the whole year of 2021 is close to doubling.
Even if factors such as the epidemic and interest rate hikes have never been completely far away, Google still soared with remarkable resilience, and the benefits of the superimposed "stock split" plan made the stock price rise sharply. However, on some specific businesses, such as Youtube, Google also has unique pressures. With the unfolding of 2022, can Google continue the dazzling performance of 68% stock price increase in 2021, and be the "most beautiful boy"?
Search advertising "with flying" revenue exceeded expectations, and the stock price rose sharply due to the stock split
Google's fourth quarter of 2021 became a keyword beyond expectations:
Revenue was $75.33 billion, up 32 percent from $56.9 billion in the year-ago quarter and higher than the average Wall Street analysts expected $72.17 billion.
Earnings per share were $30.69, up 37.6 percent from $22.3 in the year-ago quarter and higher than the average Wall Street analyst expected $27.34.
Google Cloud revenue from key growth business was $5.54 billion, up 45.8 percent from $3.8 billion in the year-ago quarter and higher than the consensus estimate of $5.47 billion by Wall Street analysts.
The focus of the market on Google's revenue is still on advertising, and the core is search advertising. Previously, in response to the downward trend of technology stocks , such as Netflix's eye-popping financial guidance , the market was extremely concerned about the performance of giants under the comprehensive pressure of the epidemic, especially in the context of a high growth base. After all, once the economy as a whole recovers badly, advertisers are bound to cut back on their spending budgets. Google's total advertising revenue for 2021Q4 was $61.24 billion, up 33 percent from $46.2 billion in the year-ago quarter, while search advertising alone accounted for $43.3 billion, up 35 percent year-over-year.
In response, Ruth Porat, Google's chief financial officer, commented: "Our fourth-quarter revenue exceeded $75 billion, up 32% year-over-year, reflecting the broad advantages of advertiser spending and strong consumer online activity... Our investments have helped drive this growth by providing the services people, partners and businesses need. We will continue to invest in long-term opportunities. On the other hand, Google has gradually shown its beneficiary status in the face of Apple's iOS privacy policy changes, mainly because Google's business modules are more diverse, not relying on a single channel like social media, and through search and video platforms, Google can improve advertising capabilities more extensively and accurately.
In addition, Google has both benefited from the delivery needs brought about by the recovery of the tourism industry and actively strengthened its cooperation with e-commerce, such as Shopify, which provides search advertising services to millions of merchants. JMP Securities analyst Andrew Boone said: "While Google's strengths in search are widespread and benefit from strong online consumer activity, the retail sector is highlighted as a key driver of growth for the fifth consecutive quarter, with apparel leading the year-on-year growth in retail search (followed by hobbies and leisure). "
"Going forward, Google remains one of the best-positioned companies in digital advertising because it leads the market in search, video exposure, and the transition from cable budgets to YouTube and its complete ad tech offering." He said.
Taken together, Google's profit performance in the fourth quarter once again amazed the market: operating profit of $21.9 billion, up 39.9% from $15.65 billion in the same period last year, and operating margin of 29%, and net profit of $20.6 billion, up 35.5% from $15.2 billion in the same period last year, a new high.
It is worth noting that Google announced that it will implement a "1 split 20" stock split plan in July this year - the single share price will be from nearly $3,000 to about $150, after the previous over-high stock price restrictions are removed, Google will usher in more attention and transactions from small and medium-sized investors, and its market performance is expected to continue to climb - on the basis of solid performance. Affected by this, Google's stock price rose more than 9% after hours on the 2nd, and closed with a sharp rise of 7.52% on February 3. As of press time, Google shares $2,960 and has a market capitalization of $1.96 trillion.
The loss rate of cloud business has increased, and the pressure of Youtube competition has not decreased
As the market has focused, the google cloud and Youtube businesses are often mentioned separately. One of them is a growth point at the next generation level, and the other is a window to compete widely with social media and acquire a new generation of users. In the face of Amazon, Microsoft, and competitors such as Tik Tok and Snapchat, Google still has some questions that need to be asked more than two sentences.
In the fourth quarter of 2021, Google Cloud revenue was $5.54 billion, up 45.8% from $3.8 billion in the same period in 2020 and higher than analysts' consensus estimate of $5.47 billion. There is no significant slowdown in growth, which alleviates potential market doubts. However, its quarterly operating loss of $890 million also exceeded market expectations, and the loss rate rose to 16%, indicating that Google may have used a lot of sales incentives and marketing expenses in the expansion of its cloud business.
In addition, Google CEO Sundar Pichai emphasized: "Our deep investment in AI technology continues to bring extraordinary and rewarding experiences to people and businesses for our most important products. Because Google's cloud business is integrated with Workspace, a portfolio of online applications such as Gmail, Docs and spreadsheets, its route is more like Microsoft Azure, which pushes the portfolio, rather than Amazon AWS, which dominates the IaaS space. Therefore, Google's cloud business advantage lies in the layout of cutting-edge technologies such as artificial intelligence and machine learning, but for traditional large customers, its attractiveness still needs time to cultivate.
Sundar Pichai said the number of Google Cloud customers who spend more than $1 million through its cloud marketplace has grown sixfold. Google has released more than 2,000 new cloud products and features in data analytics and AI, multi-cloud infrastructure, cybersecurity products, and Google workspaces. This has attracted many large customers in traditional fields, such as Siemens Energy, Chicago Mercantile Exchange and so on. On the earnings call, Google Chief Financial Officer Ruth Borat revealed that Google Cloud's unconfirmed contracts reached $51 billion at the end of the fourth quarter. At least for 2022, its growth is still worth looking forward to. Of course, catching up with AWS and Azure is unlikely to happen in these quarters.
In the fourth quarter, Google restructured its cloud division in an attempt to further enhance its competitiveness. Daniel Flax, senior research analyst at Neuberger Berman, said: "Thomas Currian (the adjusted leader of the Google Cloud team) and the rest of the team have strong leadership. "I think the cloud is one of the biggest elements in this story, and perhaps one of the most underrated." I think the company is still in its early stages of building a cloud business. He said.
With another key business, Youtube, which has 15 billion daily views, tells a much simpler story — among the most eye-catching business performances, YouTube advertising revenue was $8.63 billion, up 25 percent from $6.9 billion in the fourth quarter of 2019, but less than analysts expected at $8.87 billion. It remains a significant source of revenue for Google and occupies a special place in its advertising landscape.
But the presence of emerging platforms such as TikTok and Reels clearly continues to put pressure on Youtube. In fact, Youtube has also abandoned its efforts to make its own shows, and according to the disclosure, Youtube plans to invest heavily in the next year to maintain its pre-eminence in the video space by funding TikTok's alternatives, YouTube Shorts, and increasing live shopping.
"YouTube has created a new generation of entrepreneurs and celebrities who are attracting more and more viewers." Mike Frazier, president of Bedell Frazier Investment Counselling, said.
Chief Commercial Officer Philipp Schindler told investors on a conference call. In the fourth quarter, YouTube launched a new shopping program with a number of young star creators. However, he believes that this is a preemptive budget for TV brand advertising in the past. At least in 2022, investors can find many new changes in both Google Cloud and Youtube.
The progress of innovative business is limited, and Google's new year growth still depends on the "face" of the epidemic?
Google's innovative business, including self-driving startup Waymo, artificial intelligence DeepMind, smart healthcare Verily, venture capital funds Google Capital and Google Venture, etc., burning money is still the main theme. In the fourth quarter, its total loss reached $1.45 billion, and its revenue remained only $181 million, down 7.7% year-on-year.
In the fourth quarter of last year, Google announced an expansion of real estate investments and expanded the road test of the self-driving car Waymo to other major cities such as New York and San Francisco. Behind innovation is diversity, which is Google's DNA. "I'm excited to have innovation any time," Sundar Pichai said on the earnings call, adding that Google is also following blockchain, Web3 and has set up its own blockchain team. Of course, as of now, it has not made more moves. Sundar Pichai emphasized that Google has made many investments in augmented reality, noting plans to bring key services such as maps and YouTube into any virtual world that people might use in the future. Obviously, the idea that a series of innovative businesses can eventually become the next generation of products with the overall business is Google's vision — and if possible, a metacosm form.
Wall Street doesn't rely too much on these distant stories, and in addition to praising the excellent results of the fourth quarter, Google's key business is highly tied to corporate marketing spending, whether it is the real economy or a digital enterprise, and negative factors such as high inflation and supply chain disruptions are potential threats to Google, just as the market has previously feared. Meta, a strong leader in digital advertising, plunged 22.89 percent after hours on Feb. 3 as its results were almost the opposite of Google's, and its first-quarter guidance was weak.
It must be admitted that from the trend point of view, Google's performance actually shows that there is still a lot of digital potential in all major industries. Inflation, interest rate hikes, regulation, repeated outbreaks and changes in consumer habits are all uncertain events that occur at the same time or will happen, and uncertainty is a taboo in the market. Considering the trend after the stock split of Tesla, NVIDIA, Apple, etc., the performance of Google in the secondary market with the dominant position of artificial intelligence and other technologies should be worth looking forward to. However, in the development of the business, the fog has not completely dissipated. Thinking of danger in times of peace may be a more stable approach for a giant.