Google (Nasdaq: GOOG) (NASDAQ: GOOGL) moved to all-time highs following fourth-quarter earnings. It opened 3.5% lower the next day but quickly recovered these losses in the following days along with broad-based strength in technology stocks. Its peers like Microsoft (Nasdaq: MSFT), Apple (Nasdaq: AAPL), and Amazon (Nasdaq: AMZN) have also made new highs in recent days.
Google's Q4 earnings came in above expectations at $15.35 per share versus analyst expectations of $12.50. This was a 20% gain compared to the fourth quarter in 2018. Revenue came in below expectations at $37.57 billion versus expectations of $38.39 billion as ad sales slowed more than expected, although it was a healthy gain from the $31.84 billion posted in the fourth quarter of 2018. Currently, analysts are expecting $35.27 billion in revenue and $12.31 in earnings per share in the first quarter of 2020.
YouTube and Google Cloud
In his first earnings call since taking over as CEO for Larry Page, Sundar Pichai broke out metrics for Google Cloud and YouTube. Both of these are Google's fastest-growing segments. YouTube is particularly interesting as it is the dominant platform for online video yet has done very little to monetize this audience. YouTube generated $15.15 billion in 2019 revenue with $4.72 billion coming in the fourth quarter. Compare this to 2018 when YouTube generated $11.16 billion with $3.61 billion in the fourth quarter.
Google Cloud is playing catch-up to Amazon's AWS and Microsoft's Azure. For 2019, it accounted for $8.92 billion in revenue and $2.61 billion in fourth-quarter revenue. In 2018, Google Cloud generated $5.84 billion in revenue with $1.71 billion in the fourth quarter of that year. Notably, Google Cloud's revenues continue to accelerate, while AWS and Azure's growth rates have plateaued.
Google's search and advertising business remain the core of its business and profit-center, but this market has matured. In 2019, it grew 15% and brought in $98.1 billion in revenue. For 2020, analysts are expecting $110 billion.
Stock Breakout
Google's stock has broken out on nearly every timeframe. Its been one of the strongest stocks relative to the broader market and its mega-cap, technology peers. It broke out to new highs in October 2019 and is up 20% since then.
In an environment when interest rates are moving lower, growth is at a premium. Despite Google's revenue trajectory flattening, it's growing faster than the overall economy and the majority of stocks in the market. It's reached a size and position of market dominance where the biggest threat is regulators and politicians rather than other businesses and the marketplace.