Alphabet has overtaken Apple in market value after Google's parent company reported strong results, but the question is how long will that last?
Shares of Google’s parent company Alphabet have surged – making it worth more than Apple – thanks to better than expected quarterly profit.
Strong sales of mobile advertising, greater use of YouTube and improved cost controls were among the factors.
For the first time, Alphabet disclosed the profitability of the Google search engine and its other online services, as well as how much it is spending on ambitious technology projects such as self-driving cars and artificial intelligence through a division called Other Bets.
The Internet giant’s share price has surged 43 percent in the past year while Apple’s stock is down by 18 percent over that period, not helped by signs of softening demand for its current iPhones. However many analysts have said that Apple is likely to retake that lead in the next year.
Alphabet easily beat Wall Street’s quarterly profit forecasts.
The company said consolidated revenue jumped 17.8 percent to $21.33 billion (19.51 billion euros)in the fourth quarter ended December 31, from $18.10 billion a year earlier.
The Google unit houses its internet and related businesses such as search, ads, maps, YouTube and Android as well as hardware products such as its low-cost Chromebook laptops.
Revenue for Other Bets was $151 million (138.23 million euros), up 29.8 percent from $106 million in the same quarter last year, primarily from its smart-home monitoring unit Nest, Google Fiber, which provides high-speed Internet access, and its life sciences business Verily.
Total operating losses on the Other Bets – which include glucose-monitoring contact lenses and Internet balloons – increased to $3.57 billion (3.26 billion euros) in the 12 months ended December 31, and $1.2 billion (1.09 billion euros) in the fourth quarter.
Alphabet versus Apple
With its share price surge Alphabet surpassed Apple as the most valuable company in the United States, knocking the iPhone maker from the top spot that it has held for close to four years.
The change may signal the passing of the technology baton to Alphabet from Apple, which surged past Microsoft in market value in 2010. Microsoft in turn eclipsed International Business Machines two decades ago.
The two companies’ operating systems and apps are in direct competition with each other and Apple is still fightng in the courts with Samsung Electronics, the biggest Android smartphone maker.
For a time it looked as if Apple would never relinquish the top spot in terms of market value. Bolstered by success of the iPhone and an enormous cash hoard, Apple took over the number one place in 2012 from Exxon Mobil, and at one point in early 2015 was worth more than $760 billion.
Sustaining the lead could be tough, though for Alphabet.
The median share price forecast of 30 analysts who raised price targets after Alphabet reported strong results on Monday was $920 per share, suggesting that the company formerly known as Google could be valued at $625 billion in the next 12 months.
Apple, tracked by 49 analysts, would be valued at $748.5 billion, at the current median price target of $135.
The most bullish price targets on the companies’ shares shows that Alphabet is expected to be valued at $734 billion in the next 12 months, while Apple could hit $1.10 trillion – the first publicly listed company ever to be worth more than $1 trillion.