Yandex N.V. (YNDX) released fourth-quarter 2018 results on Friday morning, highlighting continued market-share gains from the Russian internet search industry, and strong growth from both its core advertising segment and supplementary businesses.

Still, Yandex's quarterly performance was soft relative to the guidance it only just boosted three months ago. With shares down around 8.5% in Friday's trading, let's dig deeper to better understand how Yandex ended the year.

Stock market data and charts on a colorful display


Yandex results: The raw numbers


Q4 2018

Q4 2017

Growth (YOY)


38.84 billion RUR ($559.1 million)

 27.86 billion RUR


Net income attributable to Yandex

6.059 billion RUR ($85.1 million)

 3.526 billion RUR


Earnings per share (diluted)

18.27 RUR ($0.26)

10.61 RUR


DATA SOURCE: YANDEX. Figures in Russian rubles (RUR). YOY = year over year.  

What happened with Yandex this quarter?

  • For the full year of 2018, this brought revenue to 127.657 billion RUR ($1.838 billion), up 35.7% from 2017 -- near the lower end of Yandex's full-year guidance provided in October, which called for growth in the range of 35% to 38%.
  • Excluding sales from Yandex.Market, which was deconsolidated as part of the joint venture formed between Yandex and Sberbank early last year, revenue grew 46%, accelerating from 44% growth last quarter.
  • Revenue excluding traffic acquisition costs (ex-TAC) and Yandex.Market grew 49%, to 32.678 billion RUR.
  • Adjusted net income excluding Yandex.Market increased 53% year over year to 7.516 billion RUR ($108.2 million), or $0.30 per share, falling short of consensus estimates for $0.32.
  • Adjusted EBITDA excluding Yandex.Market increased 38%, to 12.3 billion RUR ($177.4 million).
  • Yandex's share of the Russian internet search market (including mobile) was 56.5%, flat from last year's fourth quarter but up sequentially from 55.9% in Q3.
  • Search share on Android in Russia expanded 40 basis points sequentially to 49.5%, up from 45% in last year's fourth quarter.
  • Search queries in Russia increased 10% year over year.
  • Paid clicks rose 10% year over year (20% excluding Yandex.Market), and Yandex's average cost per click grew 7% (4% excluding Yandex.Market).
  • Advertising revenue grew 18%, to 29.498 billion RUR, including 18% growth from Yandex properties (to 22.393 billion RUR), and 16% growth from network members' sites (to 7.105 billion RUR).
  • Other revenue increased 235%, to 9.344 billion RUR, mostly due to growth from Yandex.Taxi, as well as Yandex.Drive and recently launched hardware devices.

Check out the latest Yandex earnings call transcript.

What management had to say

Yandex CEO Arkady Volozh stated:

Our performance in 2018 was exceptional. We strengthened our positions in search, launched new online-to-offline businesses -- Yandex.Drive and Yandex.Eats, and started sharing our technology and expertise in Yandex.Cloud. I am particularly proud of our accomplishments in self-driving, as, in just two years, we have already managed to create a real robo-taxi service.

"We remain committed to investing further in new initiatives, encouraged by the success of our ride-sharing segment of Taxi, which has now reached profitability thanks to our investments and continued focus," added Yandex CFO and Chief Operating Officer, Greg Abovsky.

Looking forward

For the full-year 2019, Yandex expects ruble-based revenue, excluding Yandex.Market, to increase 28% to 32% from 2018 -- roughly in line with consensus expectations -- assuming growth of 18% to 20% stemming from its search and portal business.

With shares rebounding nearly 40% from their 52-week lows in October, however -- at least in the near term -- this in-line guidance coupled with Yandex's relative earnings shortfall in the fourth quarter just wasn't enough to sustain its recent gains.