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5 Key Takeaways From Alphabet's Fourth Quarter

By Daniel Sparks – Updated Apr 11, 2019 at 11:46AM

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Here's a look at Alphabet's accelerating revenue growth, multibillion-dollar cloud business, and more.

Reporting earnings earlier this week, Alphabet (GOOGL -1.82%) (GOOG -1.98%) came out with results that reinforced the company's ability to consistently grow its business at strong rates. Sharp growth in advertising revenue and the company's "Google other" revenue helped the online search company post a double-digit year-over-year increase in its consolidated top line.

Here's a look at some of the most important metrics from the quarter.

Executives walking into Google's headquarters entrance

Image source: Alphabet.

22% revenue growth

Alphabet's total revenue rose 22% year over year to $39.3 billion, beating an average forecast for revenue of $38.9 billion.

In constant currency, Alphabet's revenue rose 23% year over year. That was an acceleration from constant-currency revenue growth of 22% in the company's third quarter of 2018, and it helps ease concerns about decelerating revenue growth after the company's year-over-year revenue growth slowed down in Q3.

7% operating income growth

Alphabet's operating income increased 7% year over year. The key profitability metric rose slower than earnings because of the company's narrowing operating margin.

21% operating margin

The company's operating margin during the quarter was 21%, down from 24% in the year-ago quarter and from 25% in the third quarter of 2018.

A narrower operating margin reflects growth in headcount for marketing, cloud, and ads, as well as investments in search and Google Assistant. Most of the company's new hires, Alphabet said, were engineers and product managers.

"With great opportunities ahead, we continue to make focused investments in the talent and infrastructure needed to bring exceptional products and experiences to our users, advertisers, and partners around the globe," said Alphabet CFO Ruth Porat in the company's fourth-quarter earnings release.

31% Google other revenue growth

Alphabet's Google other segment, which includes revenue from the cloud, the Android app store, and hardware, saw its revenue rise 31% year over year in Q4. That's notably an acceleration from 29% growth in Q3. Management said all three of the segment's main components helped drive this growth.

5 million G Suite customers

Management remained particularly optimistic about the largest contributor to its Google other segment: the cloud. Google CEO Sundar Pichai reiterated in the company's fourth-quarter earnings call that cloud is a "multibillion-dollar business."

Check out all our earnings call transcripts.

Pichai added: "Last year, we more than doubled both the number of Google Cloud platform deals over $1 million as well as the number of multi-year contracts signed. We also ended the year with another milestone, passing 5 million paying customers for our Cloud collaboration and productivity solution, G Suite."

Overall, the results showed more strong growth but highlighted the company's relentless commitment to investing in growth opportunities.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy.

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