Alphabet (GOOGL -1.23%) (GOOG -1.10%) reported fiscal 2021 fourth-quarter results on Tuesday, Feb. 1. The Google parent delivered exceptional revenue and earnings growth that pleased the market.
An enthusiastic ramp-up of ad spending on Alphabet's platforms fueled that growth. Before the company revealed Q4 figures, there was concern in the market that businesses may have pulled back ad spending because of the rise of the omicron variant. That was not the case, and marketers spent a whopping $61 billion with Alphabet in Q4. Let's take a closer look.
Despite the rise of the omicron variant, advertisers ramped up spending in Q4. Image source: Getty Images.
Ad revenue surges for Alphabet
In the fourth quarter, ended Dec. 31, Alphabet's advertising revenue increased by 32.5% to reach $61 billion. What's more, ad revenue increased by 15% from the previous quarter. That's an impressive increase, considering the rise of the omicron variant and the challenges it presented to businesses -- namely, rising COVID-19 cases are restricting supply chains worldwide. The resulting shortages are causing retailers to sell out of the goods consumers desire.
Still, management noted that retailers were the No. 1 contributors to year-over-year advertising growth, followed by finance, media, and entertainment businesses. That means a tailwind could arise when the omicron surge subsides and economic reopening resumes.
Regardless, Alphabet is innovating its advertising features, making it more attractive to businesses in the current operating environment. For instance, Google.com has added a curbside-pickup badge, adapting to how consumers look to shop during the pandemic. And surprisingly, Google only recently added the function where small businesses can claim and verify their profile on Google Search.
In Germany, businesses that took advantage of this feature experienced five times more phone calls than those that didn't. Overall, management said it has launched 200-plus features since March of 2020. Undoubtedly, the enhancements play a role in Alphabet's impressive growth with advertisers. Further, Alphabet benefits from the ongoing trend of people shifting their viewing from linear TV to streaming.
YouTube ad revenue increased to $8.6 billion in Q4, up from $6.8 billion in the same quarter last year. YouTube is now generating 15 billion views globally every single day. Streaming-TV ads offer an advantage to advertisers over linear TV. Ads on streaming TV can be delivered with more precision, similar scale, and more relevance.
What this could mean for Alphabet shareholders
Given that it was Alphabet's fourth quarter, investors also got a look at its full-year 2021 results. Impressively, Alphabet reported earnings per share (EPS) of $112 for 2021. That's 91% higher than in 2020 and its highest in the last decade, by far. The rise of the omicron and other coronavirus variants clearly did not slow Alphabet from delivering exceptional growth.
It's no surprise that the stock was higher on the day following the announcement. The only surprise is that it was up only 5.5%.
