Google owner Alphabet Inc (NASDAQ:GOOGL) fell short of Wall Street's expectations with its fourth quarter earnings update last night.
Profit after tax rose to US$6.59bn from US$6.04bn the year before. On a generally accepted accounted principles (GAAP) basis, net income rose to US$5.33bn from US$4.92bn the year before.
Underlying earnings per share came in at US$9.36, up from US$8.67 the year before, but well short of the US$9.64 expected by analysts.
Reported (i.e. GAAP) earnings per share were US$7.56 a share, versus expectations of US$7.63.
Surprisingly for a company that has attracted a lot of flak for its tax policies, the difference between the underlying earnings and the reported earnings was largely down to a US$586mln tax charge related to stock-based compensation for employees.
Alphabet said that henceforth it would no longer remove stock-based compensation from its adjusted (or “headline”) earnings figure.
Revenue rose 22.2% (24% on a constant currency basis) to US$26.06bn from US$21.33bn in the fourth quarter of the previous year.
Stripping out commissions of US$4.85bn paid to Google network members, revenue came to US$21.3bn, ahead of some forecasts of around US$20.58bn.
Google advertising revenues climbed 17% to US$22.40bn from US$19.08bn the previous year.
“Our growth in the fourth quarter was exceptional, with revenues up 22% year-on-year and 24% on a constant currency basis,” said Ruth Porat, chief financial officer of Alphabet.
“This performance was led by mobile search and YouTube. We’re seeing great momentum in Google’s newer investment areas and ongoing strong progress in Other Bets,” she said.