Finance

Mobile search and YouTube behind Alphabet Google’s strong profits

California-based Alphabet, parent company of Google, reported strong profit growth on Thursday, 26 January, for the final three months of 2016. The company saw its profits rise on growth in mobile search and its video-sharing service YouTube. Google remains as Alphabet’s majority operating unit and advertising is still the company’s main source of profit.

According to Alphabet its net income increased eight percent to $5.3 billion, which wasn’t as high as industry predictions on Wall Street, despite better-than-expected revenue. For earnings purposes, Alphabet categorizes operations such as self-driving cars and Nest smart thermostats into an “Other Bets” category, which almost doubled revenue to $262 million in the quarter, but still posted a loss of nearly $1.1 billion.

Alphabet’s revenue in the final quarter of last year reached $26 billion, up 22 percent from the same period the previous year. However, the company’s shares dropped more than two percent to $838 in after-market trade that followed the release of the earnings figures.

Alphabet chief financial officer Ruth Porat said in a release, “Our growth in the fourth quarter was exceptional,” crediting mobile search and YouTube which drove the high performance. “We’re seeing great momentum in Google’s newer investment areas and ongoing strong progress in Other Bets.”

Alphabet, under its new structure, is said to be expanding beyond its role as a search engine that provides advertising linked to queries. The company last year leveled up to its rivals Apple, Samsung and Amazon by pushing into hardware, launching premium-priced, in-house designed artificial intelligence products.

Google also revealed its new "home assistant" which aims to compete with Amazon's Alexa-powered devices as a hub for the smart home, and has been working to become the platform for some connected cars. During an earnings call, Google chief executive Sundar Pichai said he is deeply involved with the company’s push into artificial intelligence, believing there is a lot of potential in digital assistance to make services such as mobile search more helpful to users.

“In the long run, I think we will evolve from a mobile first to an AI first world,” said Pichai. “We are at the forefront and pushing and pushing hard and getting there.” According to Porat, the bulk of the money taken in came from "Other Bets" came from Nest, Verily, and a Fiber unit building super-fast internet lines in select US cities.

It was recently announced that Singapore-based sovereign based fund Temasek will invest $800 million in Verily, the Alphabet subsidiary focused on healthcare. The infusion of cash, for which Temasek will get a minority stake, comes as Verily works to bring some of its creations to market. Verily was known as Google Life Sciences but rebranded after the internet giant became Alphabet in a corporate restructuring.

Verily specializes in applying technology to problems in health and biology. Among the ideas discussed has been building a sickness-sensing diagnostic device along the lines of the "tricorder" seen in "Star Trek" science fiction films and television shows.