From Morningstar:

Alphabet reported revenue of $86.3 billion for the fourth quarter, indicating a growth of over 13% from the previous year. While search and YouTube advertising revenues increased by 13% and 16% respectively, network revenue witnessed a decline of 2%. Cloud revenue growth accelerated to 26% from the previous quarter, and the operating margin expanded to 27.5%.

The network effect continued to drive growth at Google search and YouTube, while increasing demand for artificial intelligence accelerated cloud revenue growth. However, weakness in Google’s advertising technology business impacted total advertising growth. Analysts expect further declines in the network segment, as advertisers prioritize Google’s owned and operated properties and use non-Google ad-tech platforms when purchasing on non-Google properties.

Morningstar increased the fair value estimate for Alphabet to $171 from $161, citing strong growth in cloud revenue and search monetization. The announcement of a fourth-quarter revenue of $86.3 billion also contributed to this increase. The company’s diversified revenue streams and steady growth in search and cloud are expected to offset the declining network segment revenue.

Key metrics for Alphabet include a Fair Value Estimate of $171.00, a current price of $151.46, a Morningstar Rating of 3 stars, an Economic Moat Rating of Wide, and an Uncertainty Rating of High.

Overall, Alphabet’s performance in the fourth quarter of the year indicated growth in key areas such as search, YouTube advertising, and cloud revenue. With an expanded operating margin and steady revenue growth in various segments, the company’s fair value estimate has been increased based on these positive results.



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