Google parent company Alphabet surpassed Apple in market capitalization in after-hours trading Monday — making it the most valuable publicly traded company in the world — after reporting quarterly results that beat expectations.
Update Tuesday morning: The markets are open, so it’s official. Alphabet is No. 1.
Apple had been the world’s most valuable public company for most of the past four years, but its shares have been on the decline lately. They weren’t helped by Apple’s release of its financial results last week, when the company reported slowing sales of iPhones, which make up the bulk (68 percent) of its revenue. In addition, Apple expected iPhone sales to continue to slip in the current quarter.
Meanwhile, Alphabet, which for the first time broke out results separately for Google, its core business, as well as what it calls Other Bets, reported strong revenue growth for both businesses, although its Other Bets — which include the company’s famed moonshots — also saw bigger losses.
Alphabet has three different classes of shares, and the full market capitalization can be calculated by adding the market value of Classes A, B and C. That number, based on after-shares trading, is at about $565 billion, Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, tells the Wall Street Journal. Apple’s market cap is $539 billion. (In regular trading, Apple closed with a market value of about $535 billion, while Alphabet closed at $530 billion.)
Apple, which has long relied on being selective — doing few things but doing them well — is now seeing its somewhat limited product line hurt its shares. With the iPhone making up the bulk of its sales but seeing a drop-off in growth, and its Macs and iPads seeing a decline as well, investors are asking what’s next. Where the company is seeing growth is in its newer businesses, including Apple Watch, Apple TV and Beats, although that segment accounted for just $4.4 billion of Apple’s $75.9 billion in revenue for the quarter.
Meanwhile, Alphabet/Google CFO Ruth Porat said repeatedly during Monday’s earnings call that the breadth of the company’s offerings helped drive its results.
The company saw “meaningful growth in all geographies, reflecting the holiday season and strong and diverse products,” Porat said. Both Porat and Google CEO Sundar Pichai said on the call that mobile ads and YouTube did “particularly well” during the quarter, although they did not provide specific numbers. They also said there was strong growth in Google’s cloud and apps businesses.
For the year, Alphabet’s Other Bets division — which includes Google Fiber, venture capital operations, Nest, driverless cars and more — brought in $448 million in revenue but lost $3.6 billion (including stock-based compensation). But investors were especially cheered by the strength of Google’s core business, which includes search, Android, YouTube and more, and shares rose as much as 5 percent in after-hours trading. Alphabet/Google’s new reporting structure, which had also helped the company’s shares rise in the past half year since it was announced, seems to have succeeded in underscoring the strength of Google’s core business even as investors and analysts know that Google is spending lots of money on a bunch of other things. In addition, Porat has reined in costs.
But back to Apple, which appears to be working on expanding its product line. It’s said to be working on an electric self-driving car; it is reportedly boosting its efforts in virtual reality; it’s possibly preparing an Internet TV service.
The market-cap crown contest will be just another front to watch in the ongoing battle between Apple and Alphabet/Google. CNBC notes that the last time Google had a higher market value than Apple was in 2010.
Photo: The Googleplex in Mountain View in September 2015. (Matt O’Brien)