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Earlier this week, Google (GOOGL) reported its fourth-quarter results that continued to surpass market expectations. Q4 for Google was all about ad revenues, with significant growth across its properties. The stock surged 6% in the after-hours trading session in reaction to its performance.

Alphabet’s Financials

Alphabet’s fourth quarter net revenues grew an impressive 23% to $56.9 billion, smashing the market’s forecast of $53.1 billion. Adjusted net income rose a spectacular 45% to $22.30 per share, again surpassing the market’s forecast of $15.90 for the quarter. Google attributed the performance to high consumer activity on Google Search and YouTube.

Google realigned its segments for reporting during the quarter. By segment, revenues from Google Services that includes Search, Advertising, Android, Chrome, Hardware, Google Maps, Google Play, and YouTube grew 22% to $52.9 billion. Google Cloud revenues grew 47% to $3.8 billion, in line with analyst predictions and slightly slower than the pace of growth for the segment a year ago. Revenues from other bets grew 14% to $196 million.

Google also reported its operating income by segment. Google Services continued to bring in significant earnings, and its operating income grew 41% to $19.1 billion in the quarter. Google Cloud and its Other Bets are loss-making divisions. Cloud had a loss of $1.2 billion, and Other Bets had a loss of $1 billion.

Among other key metrics, overall search revenues grew 17% to $31.9 billion. YouTube revenues grew 46% to $6.9 billion driven by the increased advertising and viewership on the platform. Google ended the year with revenues of $136.8 billion, which were lower than revenues of $161.9 billion reported a year ago.

Google did not provide an outlook for the current quarter. The market is looking for an EPS of $14.27 on revenues of $40.92 billion for the first quarter, and EPS of $62.63 on revenues of $180.51 billion for the current fiscal year.

Alphabet’s Search Enhancements

During the quarter, Google continued to release several product enhancements to drive growth within search, advertising, and Cloud. Google is helping address the growing concerns about the pandemic by building new features and products that help people and businesses globally.

With vaccinations in progress across the world, Google has added additional information on its COVID-19 pages to include details such as vaccination locations and eligibility conditions. It has rolled out these notifications both in Google Search and Maps.

Google Cloud’s Intelligent Vaccine Impact platform is also helping authorities improve vaccine distribution and forecasting. It is providing ad grants to the CDC, the World Health Organization, and others to promote vaccine education. It is also making direct grants to organizations addressing racial and geographic disparities in vaccination access, and opening up Google’s facilities as vaccination clinics.

To help small businesses, it launched several new features within Maps and YouTube. For instance, within Maps, it added a new community feed in the Explore tab that allows users to track takeout and delivery orders when they book or order directly from Google Maps.

On YouTube, it is building products to help creators benefit from two important trends: live video and short-form video. During the quarter, more than 0.5 million channels streamed on YouTube for the first time this year. With pandemic restrictions, live video streaming has become the preferred mode of procuring visitors for events. Artists are performing in their living rooms and churches are conducting their services online. Videos in its new Shorts player saw 3.5 billion daily views. YouTube is looking to expand this offering to other countries this year.

It is also seeing a lot of traction on its News Showcase product. Google has invested $1 billion in partnerships with news publishers as part of this investment. It has signed agreements with nearly 450 publications, most of which are local and regional, across various countries including France, Germany, UK, and Brazil. Recently, it also announced a new global deal with Reuters and an agreement with a major French publishing associations to open access to News Showcase.

Recently, Google completed the acquisition of Fitbit. The acquisition speculation was in the news over a year ago. Analysts had expected Google to acquire Fitbit in a bold move to enter the wearables space. Earlier this month, it completed the $2.1 billion acquisition of Fitbit and hopes to improve its product pipeline and help make health and wellness accessible to more people.

Google Cloud remained a high growth and a high investment area for the company. Cloud revenues for the year were $13.1 billion, compared with $8.9 billion a year ago. But losses have grown during the period, as well. Google reported Cloud segment losses at $5.6 billion for 2020 compared with losses of $4.6 billion a year ago. Losses in the segment were driven by the continued investments made within the space.

Google is not unfazed by the losses. It sees significant growth opportunity within the segment driven by market dynamics. As economies of scale kick in, Google expects to see the business turn profitable. But for now, it rightly believes in the need to continue to invest in the space. According to a Canalys report for Q3 2020, Google’s share of the global cloud infrastructure spend grew marginally from 6% a year ago to 7%.

During the same period, AWS’s market share declined from 33% to 32%. Microsoft’s Azure remained the second biggest cloud player and saw its market share grow from 17% to 19%.

Google still has a long way to go before it can catch up with either Microsoft (MSFT) and Amazon (AMZN). It will have to keep making those investments to continue to stay relevant in the race.

Alphabet’s PaaS Focus

Alphabet also remains focused on an active PaaS strategy. Last year, it had announced the release of Anthos, Google Cloud’s new open platform that lets users run applications both on-premise or on public clouds. Anthos allows developers to manage workloads running on third-party clouds and gives them the freedom to deploy, run, and manage their applications on the cloud of their choice, without requiring administrators and developers to learn different environments and APIs.

Besides Anthos, Google also already offers a suite of tools and libraries that help developers build quicker on the The Google Cloud platform. Its tools allow developers to manage resources, simplify debugging, and provide a solution for running API backends. Its SDK offers interactive command line tools to help developers manage virtual machines, Cloud SQL instances, and deployments. It also includes libraries for the Google Cloud APIs available in package managers like Maven, npm, and NuGet.

Google still does not share a lot of details on the developer statistics on its platform. It will be interesting to see some metrics around the platform. They are pursuing a PaaS strategy focused only on large enterprise workloads. As far as I know, they don’t have a startup ISV focused developer ecosystem strategy for Google Cloud.

The market is pleased with Google’s performance. Its stock has been trading at around $2062.37 with a market capitalization of $1.39 trillion. It hit a record high of $2,116.50 this week. The stock had fallen to a 52-week low of $1013.54 in March last year.