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Amazon (NASDAQ:AMZN) & Alphabet (NASDAQ:GOOGL) deliver record Q4 results

In overnight trading, Google parent Alphabet Inc. (NASDAQ: GOOGL) and Amazon.com Inc. (NASDAQ: AMZN) released their fourth-quarter results to cap off a strong financial year 2020 for both companies.

Global ad spending continues to rebound

Alphabet announced record fourth-quarter revenue, reflecting a strong rebound in global advertising spending after customers previously put purchases on hold due to COVID-19. In after-market trading, Alphabet shares were up 7.57% to US$2,064.46.

Total fourth-quarter revenue rose 23% from US$46.1 billion to US$56.9 billion, primarily driven by advertising revenue from Google and YouTube.

Operating income increased 69%, from US$9.2 billion to US$15.7 billion, showcasing that despite its size, Alphabet continues to deliver strong operating leverage.

For the first time, Alphabet broke out its Cloud business into a separate reporting segment. Google Cloud encompasses revenue derived from infrastructure, data analytics, and Google Workspace (formerly known as G Suite). These results can be now be compared to other cloud providers such as Amazon’s AWS and Microsoft Corporation’s (NASDAQ: MSFT) Azure.

Cloud revenue rose 47% compared with the year-ago period to US$3.8 billion, however, the business unit remains unprofitable, posting an operating loss of US$1.2 billion.

For the full-year, Alphabet recorded revenue of US$182.5 billion and operating income of US$41.2 billion, a 13% and 20% respective increase compared to 2019.

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Bezos leaves his best quarter for last

Amazon finished 2020 with its strongest quarterly result to date, driven by pandemic-induced online holiday shopping. In after-market trading, Amazon shares were up 0.27% to US$3,389.10.

Sales increased 44% to US$125.6 billion in the fourth quarter, compared with US$87.4 billion in the prior corresponding period. This is the first time in the company’s history quarterly sales have been above US$100 billion.

Operating income increased to US$6.9 billion, compared with operating income of US$3.9 billion in the year-ago period, an increase of 77%.

Amazon had a record-breaking holiday season, delivering more than a billion toys, home, fashion, electronics, beauty, and personal care products to customers worldwide.

The company also announced founder and CEO, Jeff Bezos, will transition to the role of Executive Chair, with Andy Jassy to become Chief Executive Officer. Jassy is currently head of Amazon Web Services and has been with the company since 1997.

With the conclusion of the final quarter, Amazon delivered full-year revenue of US$386.1 billion up 38% from US$280.5 billion in 2019.

Operating income increased 58% to US$21.3 billion from US$14.5 billion, illustrating similar unit economics to Alphabet. As the top-line sales increase, the business continues to scale and more dollars drop to the profit line.

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At the time of publishing, Lachlan does not have a financial or commercial interest in any of the companies mentioned.

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