Alphabet Posts Big Profits and Splits Stock: What Comes Next for Google Parent?
A Banner 2021 for Alphabet
Google parent company Alphabet (GOOGL) just closed out its biggest growth year since 2007, beating Wall Street’s expectations on the top and bottom lines. This was mostly driven by a 33% jump in advertising revenue, tied into the company’s search engine dominance. Other aspects of Alphabet’s business grew as well, including a 25% increase in YouTube advertising.
Google’s upbeat earnings report helped shares of other tech stocks rise on Tuesday, as Pinterest (PINS), Twitter (TWTR), Meta Platforms (FB), and Snap (SNAP) all finished in the green. Some analysts argue the data shows digital advertising received a permanent boost from the pandemic. Another growth area is cloud computing, and while Google Cloud isn’t yet profitable, executives say they will continue to invest in the division.
Explaining The Stock Split
As part of its earnings announcement, Google said it would enact a 20-for-1 stock split. This means anyone that owns Class A and Class C shares as of July 1, 2022, will effectively receive more shares, albeit at a lower individual price. Investors will retain the same value of their investment, spread out over a larger number of shares.
Over the past couple decades stock splits have become less popular. Still, other big names in tech such as Tesla (TSLA) and Apple (AAPL) have enacted stock splits since the start of the pandemic. Investment managers say these companies are looking to make shares more affordable for individual investors. For example, Alphabet share prices will fall from around $2,750 to $137 apiece.
Looming Antitrust Legislation
Predicting what’s next for Google is difficult given the potential impact of antitrust legislation in both the US and Europe. Regulators have already filed lawsuits concerning the search engine giant’s market dominance. Ad-tech, app-store business, and claims surrounding the collection of private data are all the subject of legal action.
Analysts predict Google’s best-case scenario is high legal fees and fewer acquisitions that would draw scrutiny from regulators. Judicial rulings and new laws forcing the tech giant to sell off business units and divest from certain areas is likely a worst-case scenario. Google executives and lobbyists working on its behalf have urged Congress to consider all aspects of potential legislation. Alphabet’s big year is a testament to the company’s growth, but it faces clear challenges going forward.
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