
Alphabet Announces Fourth Quarter and Fiscal Year 2016 Results - maverick_iceman
https://abc.xyz/investor/news/earnings/2016/Q4_alphabet_earnings/
======
MarkMc
Net income before tax:

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...](https://abc.xyz/investor/news/earnings/2016/Q4_alphabet_earnings/)
and
[https://www.google.com/finance?q=NASDAQ%3AGOOGL&fstype=ii&ei...](https://www.google.com/finance?q=NASDAQ%3AGOOGL&fstype=ii&ei=QeWKWJG5B8OJ0gSGsJKoBA)

~~~
jboggan
The way I like to think of it is that Google has a wondrous faucet that
constantly exudes liquid gold, about a cubic centimeter every second. It is
our job to keep the faucet open. Occasionally we also do other cool stuff.

(19.32 gr/cm^3)(37.88 $/gr)(60 * 60 * 24 * 365 s/year) ~= $23B, close enough.

~~~
eutectic
The density of gold at its melting point is actually 'only' 17.31 g/cm3.

------
bitmapbrother
This was due to a one time tax hit.

>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...](http://www.marketwatch.com/story/the-tax-hit-that-made-google-miss-
on-earnings-and-the-big-change-that-will-keep-it-from-happening-
again-2017-01-26)

~~~
JumpCrisscross
> _This was due to a one time tax hit_

Was it a one-time hit or is this the new normal for stock-based compensation
(SBC)?

~~~
curiouscats
I believe the "one time tax hit" is adjusting for their past fake non-GAPP
earnings which pretended giving away billions in stock wasn't material (I am
guessing, so I might be wrong).

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...](http://investing.curiouscatblog.net/2016/04/21/buybacks-giveaways-to-
executives-and-non-gaap-earnings/)

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.

~~~
maverick_iceman
Is there any reason someone would look at non-GAAP earnings instead of GAAP
given that companies muck around non-GAAP deciding whatever costs to exclude
depending on a whim?

------
aresant
Editorializing:

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.

~~~
nyrulez
It doesn't work like that. Lower CPC does not mean lower value. It just means
Google pushing into new eco-systems where CPCs are different from desktop
search (e.g. mobile, YT, new publishers/partners) and it may take some time to
reach equilibrium among the various actors depending on the ROI of the medium
for the respective actors.

~~~
pisarzp
Precisely that. Change in Google's CPCs is a great example of Simpson's
Paradox. CPCs on every property separately are growing, but aggregate is
declining due to much faster growth in areas where CPCs started low

------
theelfismike
Interesting the effective tax rate went from 5% last year to 22% this year.

What would cause that?

~~~
magicalist
Someone else will have to explain what on earth it means, but last year's
press release said

> _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...](https://abc.xyz/investor/news/earnings/2015/Q4_google_earnings/)

~~~
khuey
ETR = effective tax rate.

------
spectrum1234
So crazy these numbers aren't in thousands like most companies' financials but
in millions...

~~~
Analemma_
The financial statements of these companies boggle my mind sometimes. In
addition to Google's, I saw this bit on Microsoft's today:

> 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!

------
shmerl
Is there some way to see how well Google Fiber is doing? It's really worrying
that they seem to be slowing it down. Without such disruption and newly
corrupted FCC, we might be entering pretty bad times for the ISP users.

~~~
ojbyrne
I guess you missed the news: [https://arstechnica.com/information-
technology/2016/10/googl...](https://arstechnica.com/information-
technology/2016/10/google-fiber-laying-off-9-of-staff-will-pause-plans-
for-10-cities/)

~~~
shmerl
I didn't miss it. But it doesn't provide any financial info. And quotes like
"Larry Page got tired of it" which were floating around the time that article
came out, weren't really helpful. What I want to understand, is Google Fiber
profitable or not? Just being "tired" because it grows slower than they
expected, isn't a good reason to gut it.

~~~
sanxiyn
> What I want to understand, is Google Fiber profitable or not? Just being
> "tired" because it grows slower than they expected, isn't a good reason to
> gut it.

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.

~~~
shmerl
Because it shows they they didn't really mean it. If it's profitable, and they
really wanted to disrupt the stale ISP market, they should have persisted.
Otherwise they just showed that they aren't any better than incumbents.

~~~
pc86
It can be profitable on paper but be a net loss after opportunity costs are
factored.

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.

~~~
shmerl
That's what incumbents say about not upgrading their users to better network,
and instead spending crazy money on buying media companies. Later offer more
profits, and greed drives their decisions.

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.

------
zitterbewegung
Also, Alphabet(GOOG) missed expectations.
[https://finance.yahoo.com/m/e866d713-3773-3b26-83ce-07bb214b...](https://finance.yahoo.com/m/e866d713-3773-3b26-83ce-07bb214b9b7a/ss_live-
blog%3A-alphabet-stock.html)

~~~
afthonos
Personal pet peeve: the map is not the territory. Alphabet didn't miss
anything; the analysts mispredicted performance.

~~~
fnovd
>Alphabet didn't miss anything; the analysts mispredicted performance.

Taken to the extreme, no company ever underperforms and every unrealized
expectation is the fault of the analysts.

~~~
btian
False.

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.

~~~
gigatexal
And yet in after-market trading the stock is down some 3%. I do think though
it'd be cheaper for Google to find a way to diversify away from ads now that
it's likely having more competition from the likes of Facebook and Snapchat
but I'm no MBA nor an analyst so what do I know.

~~~
gigatexal
if you're going to down vote, please respond with why

~~~
dangrossman
3% is a normal daily up and down for GOOG. In the past 15 minutes, it's
regained 1/3rd of that loss in after-hours trading. The share price is still
basically sitting at its all-time high. Your comment is potentially
misleading, confusingly worded, and it's unclear what point you were trying to
make. Some combination of those things should explain any downvotes.

~~~
gigatexal
Some data to back up the closing price (all but useless given the after-hours
price and the apparent open for tomorrow being pretty much what it was today
before earnings): I took the last 20 days of adjusted closing prices for GOOG
from finance.yahoo.com, and a -2.18% change is 2.76 std-deviations away from
the average fluctuation. Not significant but still a lot.

Thanks for response.

------
MarkMc
Revenue is up 22% but EPS is up only 7%. I would normally expect Google's EPS
growth to be higher than revenue growth. Where are they spending all that
extra income?

~~~
curun1r
They did increase headcount by more than 10k (from ~62k to ~72k). Headcount
tends to produce more revenue eventually, but there's a lag. Staffing up by
that much indicates that they're predicting significant growth.

~~~
theDoug
(I'm an employee, with clear biases)

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/](https://cloud.google.com/about/locations/)

~~~
MarkMc
No, that doesn't explain it. Some cost has to be going up by _much more_ than
22%. Headcount only went up 16% - ie. from 62k to 72k.

~~~
humanrebar
Market rate for engineers has outpaced inflation for some time. That accounts
for some of that gap.

------
grn
You can see Ruth Porat (Google and Alphabet CFO) and Sundar Pichai (Google
CEO) review their results on an hour-long webcast:
[https://www.youtube.com/watch?v=A0Gqd_r-8ng](https://www.youtube.com/watch?v=A0Gqd_r-8ng)

------
brilliantcode
so Adwords is literally a money printing machine that shows no sign of
slowing....

------
oneplane
Are we not going to talk about the fact that they are on abc.xyz? I think it's
hilarious.

~~~
chrisseaton
It's just their corporate domain name isn't it?

~~~
ehsankia
Yes, it's the alphabet website.

~~~
chrisseaton
...so why's it hilarious?

