Finance: Alphabet earns over 100 billion USD net profit for the first time

The Google Group Alphabet generated revenue of USD 96.5 billion in the fourth quarter of 2024 (+12% compared to the fourth quarter of 2023), of which it was able to retain USD 31 billion as operating profit (+31%). This means that the operating margin increased from 27% to 32%.

According to the published financial figures, operating cash flow for the quarter even more than doubled to 39.1 billion dollars. Nevertheless, Alphabet investors reacted with disappointment. Pre-tax profit rose by 32 percent to 32.2 billion dollars, while net profit increased by 28 percent to 26.5 billion dollars. This is because the expected tax burden has risen by two billion to 5.7 billion dollars.

The majority of revenue continues to come from advertising income, which grew by almost eleven percent to 72.5 billion dollars in the final quarter of the year. Revenue from subscriptions, app fees and end device sales rose by just under eight percent to 11.6 billion dollars. This area was overtaken by the cloud business, which soared by 30 percent to twelve billion dollars. Other bets contributed 400 million dollars, a fall of almost 40 percent. But this is nothing more than a rounding error for Alphabet.

Alphabet reported operating profits in the following divisions: Google Services (advertising, subscriptions, app fees, end devices) improved by 23 percent to 32.8 billion dollars. The cloud business was significantly more profitable, increasing by 142 percent to 2.1 billion dollars. The operating loss of Other Betting increased by 36% to 1.2 billion dollars.

Annual figures

Alphabet reports revenues of 350 billion dollars (+14%) for the full year 2024. Google generated almost half of this in the USA (170.4 billion dollars); this market also grew at an above-average rate of 17%. The global operating profit of 112.4 billion dollars is a third more than in 2023.

The operating cash flow increased by 23% to 125.3 billion dollars. Pre-tax profit is even 40 percent higher (120 billion dollars). However, the tax burden has risen by 65% to 19.7 billion dollars, leaving a net profit of 100.1 billion dollars (+36%). This is the first time the data group has posted a twelve-figure net profit for the year.

Expenses exceed income

However, Alphabet is also spending money with both hands. In 2024, almost 70 billion dollars flowed back to shareholders, mainly in the form of share buybacks (62.2 billion dollars, roughly at the previous year's level). The Group paid dividends for the first time, albeit on a comparatively small scale (7.4 billion dollars).

Expenditure on real estate, servers, and other capital investments has risen sharply. While 32.3 billion dollars were spent on these in 2023, this figure had already risen to 52.5 billion dollars by 2024. That is 63 percent more. In the current year, Alphabet and Google boss Sundar Pichai wants to add almost 50 percent more: he has budgeted 75 billion dollars for capital assets. The AI boom is hungry for powerful servers.

Although this expenditure does not immediately reduce profits, it does lead to higher depreciation in the long term. The cash position is burdened immediately. The sum of investments in capital assets and returns to shareholders almost equals the operating cash flow. As Alphabet naturally still had to cover ongoing operating expenses and did not take on any additional net debt, the Group had to sell investment securities. While Google still had 110.9 billion dollars in cash at the end of 2023, one year later it was “only” 95.7 billion dollars. At the time of going to press, Alphabet shares were down more than seven percent in after-hours trading.

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