Alphabet Announces Fourth Quarter and Fiscal Year 2016 Results
abc.xyz
abc.xyz
2012: $14,469 m
2013: $15,899 m (up 9.9%)
2014: $17,259 m (up 8.6%)
2015: $19,651 m (up 13.9%)
2016: $24,150 m (up 22.9%)
Impressive growth for such a big company.
Sources: https://abc.xyz/investor/news/earnings/2016/Q4_alphabet_earn... and https://www.google.com/finance?q=NASDAQ%3AGOOGL&fstype=ii&ei...
(19.32 gr/cm^3)(37.88 $/gr)(60 * 60 * 24 * 365 s/year) ~= $23B, close enough.
>Alphabet was forced to swallow a $586 million tax charge on the non-GAAP line related to its stock-based compensation, costing the company about 83 cents a share — the difference between a substantial earnings miss and a huge beat.
>The tax charge is the result of a rule change in the U.S. targeting companies’ use of stock-based compensation to sweeten their adjusted earnings numbers. The Financial Accounting Standards Board last year implemented changes that force companies to better account for the tax benefits of paying employees in stock instead of cash, and the charge reflected the benefit Alphabet had realized for the full year.
http://www.marketwatch.com/story/the-tax-hit-that-made-googl...
Was it a one-time hit or is this the new normal for stock-based compensation (SBC)?
The practice of excluding billions in stock giveaways for non-GAPP earning (as not a real cost) was long seen as misleading by me and many others http://investing.curiouscatblog.net/2016/04/21/buybacks-give...
They also decided to stop using that deceptive practice, so going forward the non-GAPP earnings will be less fake.
It is sad Google used such deceptive practices. I believe it was forced into being less deceptive by accounting standards not by some decision to be less deceptive going forward.
Paid clicks on Google properties +43% - "yaaay we're driving more paid search!"
Cost-per-click on Google properties -16% - "ouch our advertisers are seeing less value on these add'l clicks!"
To me the second part of this is going to be most interesting to watch - if the clicks they are onboarding are lower quality, this is going to be a net negative.
For example we are probably paying half for the same quality Google Shopping clicks in New Zealand than we are in Australia or the US. This won't last.
Watching an ad on Youtube is considered a click, but advertisers pay less than search ads.
Cost per click just reflects a change in where clicks are from.
I have felt like the easy pickings have been behind them for a while but given enough money you can buy a lot of traffic. Not great traffic mind you but a lot of it.
YouTube can target ads much better than TV, and with TrueView ads the advertiser only pays if the viewer doesn't skip, so more of the revenue is going to be coming from ads that mutually add value (at least that's the theory)
There's a correlation between TV advertising and increased sales over the long term.
http://adage.com/article/media/study-affirms-long-term-sales...
(The favorability thing has been lab-tested by showing people subliminal adverts, among other things.)
This is why super bowl ads are more expensive per viewer, because the audience can expect their social group to have also seen the ads.
What would cause that?
> For Q4 2015, our effective tax rate reflects impact of certain one-time items in the U.S., specifically the resolution of a multi-year audit with an ETR impact of 9%, as well as the full year impact of the R&D tax credit with an ETR impact of 8%.
https://abc.xyz/investor/news/earnings/2015/Q4_google_earnin...
"Porat replied, “In terms of, you noted the one-time item, there are really two I’m actually going to call out. One was in the cost of revenues. I noted that as equipment costs were elevated by some one-time charges, and so there was some pressure there. And then the other item I noted was with respect to our tax rate. I noted that there was slightly elevated tax rate this quarter. It’s always affected by the geographic mix of results but we did have a discrete that affected the US tax rate, to make that clear.”"
It still doesn't answer the question. Basically a one time charge increased the tax rate. In one of the live blogs, an analyst mentioned some windfall tax from Europe. But now I can't find it.
The anomaly was Q4 2015, not this most-recent quarter.
Source: Google Finance
5% is very unusual.
Perhaps you think Google will eventually in the future pay 35% and everything in the past was just an anomaly?
Because it's a laughable thought, or if you're absolutely convinced that is the case you're incredibly naive.
You're mixing up mean reversion with extrapolation.
You know Google is a global company, right? Corporate income tax rate in Ireland is 12.5%.
Have you seen any global company paying 35% income tax?
There is no way you can spin it, there is clear avoidance & the excuse is a battle on details of the law.
> Accounts receivable, net of allowance for doubtful accounts of $426 and $335
What they're saying is, that's $426 million dollars they're owed that they expect to not get, because of defaults and deadbeat customers. And it's just a line item!
"(Units in thousands, Revenue in millions)"
Walmart: http://s2.q4cdn.com/056532643/files/doc_financials/2017/Q3/Q...
And so on.
Why is it not a good reason? Even if Google Fiber is profitable, it can still be a bad idea after you consider opportunity cost.
If it makes $500 million a year in profit, but the resources devoted to it could be used on a project that is reasonably believes to offer (for example) $700 million a year in profit, it makes financial sense to kill Fiber.
The whole point Google Fiber was trying to make (at least Google hyped it this way), was that it's possible to have a profitable ISP that offers cutting edge network. But if Google think the same way as incumbents, then they didn't just fail to prove the point, they proved the opposite. I.e. that greed stops progress.
So no, it doesn't make sense to kill Fiber if Google's intentions and declarations were true. If they lied, then yeah, it's easy to understand what happened.
Taken to the extreme, no company ever underperforms and every unrealized expectation is the fault of the analysts.
Most companies provide guidance. They under perform if they do worse than guidance.
Alphabet on the other hand does not provide guidance. And frankly it's quite silly to call 20+% growth a miss.
To the extent that we can assume equity prices mean anything, of course.
About the 22% growth, that isn't being called a miss. They actually exceeded guesses on revenue. Net profit, while up, is what is being called a miss. Which net profit you want to use changes the increase but GAAP earnings were up 7%.
Thanks for response.
After earnings, there are two questions:
1. How did X do?
2. How did analysts think X would do?
What's not ok is that the headlines are invariably "X misses expectations". No, the expectations were wrong.
I'm not saying a company can't do well or badly. Only that its job is not to match analyst expectations, and "X misses expectations" promotes that fiction.
Say I want to buy stock in a company. To decide which, I look at what analysts have to say about various companies, and pick one that they predict will do well. That's the job of analysts: to give prospective buyers (and sellers) an idea of where a company is heading so we can make buy/sell decisions.
That's very different from grading the "efficiency" of the company. In fact, the analyst's job is to take as many inefficiencies into account as they can. I don't care if this company under pristine circumstances can get 60% profit margins; if the analyst knows the current circumstances can only yield 20%, they had better give me an estimate of performance with 20% in it.
Seen in that light, analysts predicting something different from the company's actual output is clearly an analyst failure. But do notice that this doesn't mean the stock should ignore the error, since buy/sell decisions are made on the basis of analysts' expectations.
Of course, there's something to be said for it being a "term of art". This may just be my layman's interpretation.
Precisely this. Large scale infrastructure growth also costs quite a bit, especially when you pay for your own network and other works in progress https://cloud.google.com/about/locations/
http://www.techrepublic.com/article/google-uses-deepmind-ai-...
http://www.cnbc.com/2015/08/10/googles-abcxyz-just-put-this-...