Google this: As tax row rages, search giant grows even bigger than Apple

Alphabet posted a fourth-quarter profit of 4.9 billion US dollars (£3.4 billion) on Monday, up from 4.7 billion US dollars (£3.3 billion) a year ago.

The announcement sent its share price up as much as 9% in after-hours trading on Monday night.

It means Alphabet’s market value stood at 555 billion US dollars (£386 billion), compared with Apple which is valued at 533 billion US dollars (£371 billion).

Though Apple reported record profits in its own financial results last week, the California-based firm predicted iPhone sales would decline for the first time in the device’s history in the next quarter.

Google reorganised itself under Alphabet last October, and this set of results is the first time the group split itself out into its two major divisions.

Google holds its lucrative businesses such as digital ad sales, search engine and YouTube.

The rest of Alphabet is made up of the group’s more experimental ventures such as self-driving cars and internet balloon programmes.

On an annual basis Alphabet’s other businesses, which it labels Other Bets business, lost 3.6 billion US dollars (£2.5 billion) during the period.

Google’s finance chief Ruth Porat hailed the “vibrancy of the business” during the announcement, with video-sharing site YouTube, as well as the widely used Google search engine, named as the core of the company’s growth.

However, the continued rise of search and advertising could be down to rival Apple, one analyst has argued, suggesting that as more mobile users move to its iOS platform over Google’s Android, Google actually benefits.

Richard Windsor, analyst for Edison Investment Research, said: “The greater usability of the iOS user experience when compared to that of Android means that an iOS device generates around double the traffic of an Android device at the same price point.

“Consequently, there is far more opportunity in iOS to target users with marketing, resulting in meaningfully higher revenues.

“Edison estimates that Google’s revenue per user on iOS is more than double that on Android. Consequently, when the user shifts from Android to iOS, Google benefits in the short term.”

Google is currently at the centre of a tax row in the UK after it agreed to pay £130 million in back-taxes that stretch back to 2005. The agreement was seen by some as too lenient for the internet giant.

Business Secretary Sajid Javid, in an interview with the BBC, said the settlement “wasn’t a glorious moment”.

The company will also give evidence to the House of Commons Home Affairs Committee on countering extremism on Tuesday alongside social network Facebook, which last week posted its own financial results, which included a revenue rise of more than 40% to £12.5 billion.

Industry expert and founder of technology news website Pocket-lint.com Stuart Miles said the results were a sign of Google’s forward thinking, and that the money being made now would serve it well in the long term.

“They’re using today’s revenue to pay for tomorrow’s future,” he said.

“Not only are they making investors feel more comfortable because the ‘Other Bets’ breakdown shows them exactly how much is being spent on self-driving cars, but they are showing them that they’re using this amazing product that makes so much money - Google Search - to finance the things, like driverless cars, that will come in the future.

“The result is that while Apple is perhaps perceived as a company for now, selling smartphones and laptops, and is very secretive about the future, Google is thinking for the future and showing everyone what they think will be big in 10 and 20 years’ time, and investing in that future.”

However, Mr Miles warned the results were likely to spark further debate on the company’s tax status in the UK.

“This certainly won’t help. People’s perspective of Google will be reinforced as, wow, they make a lot of money, why aren’t they doing their bit?. But I don’t think it will make much difference as Google will say it is following the law and is paying what it should.”