Google Owner Alphabet Dethrones Apple as World’s Most Valuable Company

Alphabet, Google‘s parent company, has dethroned Apple as the world’s most valuable company after a blockbuster quarter fueled by the growth of its digital advertising business.

In its first earnings report since spinning off Google’s businesses and creating the new parent company Alphabet, the company announced a $4.9 billion profit — up from $4.7 billion at the same time a year ago. The news sent Alphabet’s stock price surging, giving the company a rough worth of $570 billion versus Apple, which is worth around $535 billion.

Apple announced a record quarter last week. However, the company faces a tough road in 2016 as smartphone sales are starting to stagnate. Meanwhile, Google’s advertising business is still the engine that is driving the company forward. Paid clicks on advertisements have grown 31 percent year over year, according to the report, with much of the growth coming from mobile.

“Alphabet had the combination of growth and transparency, which is the magic 1-2 combination in this market, while Apple is struggling through a bad hitting streak of soft growth,” Daniel Ives, managing director at FBR Capital Markets, told ABC News today. “This speaks to some of the challenges [Apple CEO] Tim Cook and Apple have run into over the last few months as the iPhone 6s has been disappointing and resulted in near-term growth concerns for the company.”

Ruth Porat, a Wall Street veteran who was hired as Google’s chief financial officer, has promised to bring financial discipline to the company. Porat’s approach, coupled with the fact that investors have for the first time been given a clear breakdown of each business unit’s performance, was key to helping it take the top spot from Apple, Ives said.

“This market is all about rewarding the combo of growth and profitability,” Ives said. “Investors are focusing on names like Alphabet hitting its stride while Apple has stumbled a bit out of the gates in 2016.”

Google has always been a search engine and advertising business at its core but over the years it’s grown into a company with diverse interests ranging from self-driving cars to home automation systems. The idea of Alphabet is to spin off some of those businesses from Google, a move Alphabet CEO Larry Page said would make the company “cleaner and more accountable.”

For the first time ever, investors were privy to a breakdown of how much Alphabet is spending on its famous experimental moonshot projects, which range from self-driving cars and Internet-beaming drones to fighting cancer. Labeled as “other bets,” Alphabet revealed it spent $3.56 billion on those projects in 2015.

While it’s a huge milestone for Alphabet, Ives said he wouldn’t count out Apple as the company works toward the likely launch of a new iPhone this year.

“Overall, it’s symbolic Alphabet dethroning Apple from the top of the market cap summit ahead of an anticipated iPhone 7 release,” he said. “It speaks to Apple becoming a ‘prove me’ stock in the eyes of the Street with some wood to chop ahead.”

Article source: http://abcnews.go.com/Technology/google-owner-alphabet-dethrones-apple-worlds-valuable-company/story?id=36663139

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