Google’s parent company Alphabet Inc. reported their quarterly sales on Tuesday and it exceeded all expectations, as its internet advertising business had surged because of consumers using Google search as they shopped online and advertisers raising their marketing budgets.
Alphabet’s shares went up more than 8% in after-hours trading, shares also rose when the company announced that it was going to undertake a 20-to-1 stock split.
Global trend towards digital economy
The results reinforced that a global trend has started and the world is moving towards a more digital economy that has made Big Tech companies resilient to many small shocks. There are many concerns about the rising inflation and COVID-19 variants and supply-chain shortages have rattled The Wall Street and hurt the sales of some businesses. The companies that control the crucial gateways to e-commerce, hybrid work and streaming entertainment have not seen a dip since the early days of the pandemic.
Alphabet’s sales have increased significantly
Alphabet’s sales have increased significantly 32 percent to $75.3 billion in the fourth quarter, for a third straight quarterly sales record and topping the average estimate of $72 billion among financial analysts tracked by Refinitiv.
Consumers jumped on Google search looking for apparel and hobbyist items, while retail, finance, entertainment and travel advertisers raised marketing budgets, Google’s chief business officer, Philipp Schindler, had said on an earnings call.
Analysts have stated that Google generates more revenue from internet ads than any other company, proving that its growth is unstoppable for the foreseeable future.
“The pandemic has handily accelerated the world’s reliance on digital advertising,” said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown. “Sitting through traditional TV advert breaks or reading billboards suddenly feels completely archaic in the age of streaming and mobile phone addiction.”
Other competitors’ shares also rose
Shares of competitors in online ads including Facebook owner Meta Platforms Inc, Twitter Inc, Trade Desk Inc and Snap Inc all rose as well.
Under the planned 20-for-1 stock split, investors as of July 1 will receive 19 additional shares for each one held. The split is subject to shareholder approval and will make the stock more affordable and also potentially eligible for inclusion in more market indexes.
Shares of Apple Inc. and Tesla Inc. rallied in 2020 after splits, but increasingly brokerages such as Robinhood Markets allow purchases of fractional shares, diminishing some benefit of the tactic.