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Google becomes most valuable public company on the planet

Alphabet steals the market cap throne from Apple after beating analysts' expectations by a healthy margin

It’s official – the artist formerly known as Google has pinched the title of ‘the most valuable public company on the planet’ away from Apple; for the time being at least.

Alphabet released its earnings after the closing bell yesterday and investors liked what they saw. Total revenue increased 24% year-over-year in constant currency to $21.3bn, with profits of $4.9bn.

Analysts expected $20.77bn in revenue, according to a consensus estimate from Thomson Reuters.

Fuelling the strong growth was mobile search and YouTube. The figures will silence those raising concerns that Google may be struggling to transition its bread and butter search offering away from the PC and onto mobile.

There has also been a degree of noise made about just how much money Alphabet squanders on its so-called ‘moon shot’ projects – the blue sky experiments such as automated cars and augmented reality.

The Google-Alphabet restructuring gave investors their first real glimpse at the profit killing side of the business. The search giant blew a cool $3.6bn on its mad scientist projects. While the figure is eye watering, the consensus on Wall Street seems to be ‘who cares?’ given the headline figures.

The share price shot up in after hours trading and as the opening bell rang today, Google stole the throne as the most valuable public company from Apple. As of 9:45 a.m. EST, Alphabet had a market cap of $547.1bn, versus Apple's $529.3bn. Apple had held the title without challenge for four years.

"Our very strong revenue growth in Q4 reflects the vibrancy of our business, driven by mobile search as well as YouTube and programmatic advertising, all areas in which we've been investing for many years. We're excited about the opportunities we have across Google and Other Bets to use technology to improve the lives of billions of people," said Ruth Porat, CFO of Alphabet.

The company underwent a restructuring in August, which saw Alphabet become the holding company of the Google, effectively segregating the profitable search business from the other not so profitable ventures.

Prior to the restructuring, Google had something of a strained relationship with Wall Street, often shunning profits and making it difficult to understand exactly where the money was coming from and going to. The new Alphabet has been much more investor friendly, not only offering a transparent view of the business, but repurchasing $5bn of company stock.

Alphabet has also been taking its enterprise business much more seriously, putting money and effort into its public cloud offerings and its partner ecosystem.

In November, the company hired Diane Greene, co-founder and former CEO of VMware, to run its enterprise business. The appointment was seen as a clear message that Google was ready to take a seat at the enterprise table.

Sundar Pichai, CEO of Google, said during the earnings call, that the company had pioneered cloud scale technologies and was well placed to become a dominant force in enterprise space.

“Our data centres, infrastructure, machine learning, and premium data services are leaders in the Cloud space as is our price-to-performance ratio,” he said. “And we are now able to bring this to bear just as the movement to cloud has reached a tipping point.”

*UPDATE 04/02/16*

Google is no longer the most valuable public company on the planet. 

Read more on Channel Business Management

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I guess if you can drop $3.6 billion on research and still come out $1.9 billion in the green then you can pretty much do what you want.
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