Alphabet Eclipses Apple to Become Most Valuable Company in the World

04 February 2016

Alphabet Eclipses Apple to Become Most Valuable Company in the World

Alphabet, the parent company of Google, has beaten Apple (worth $535bn) to be the most valuable publicly traded company in the world. Now apparently worth $568bn, Alphabet’s Q4 profits in 2015 were reported at a record $4.9bn, up from $4.7bn the previous year. This news meant shares rose by 9% in risky after-hours trading.

Apple’s financial reports worried investors due to slowing sales of iPhone devices, which are responsible for 68% of the company’s revenue. Its conservative outlook, focusing on being highly selective about the products it manufactures, could have hurt its overall value. The company’s place at the top of the business leaderboard then slipped behind Google’s parent company, where the core business (predominantly pay-per-click ads) is strong despite its ‘Other Bets’ (including some experimental investments, such as driverless cars, virtual reality and Google Fiber) making losses. The Other Bets lost $3.6bn, and Google’s operating income was calculated at $23.4bn.

Dave Lee, the BBC’s technology reporter, believes that Alphabet is “being rewarded for spending big on its many technology gambles”. Having been under pressure to be more open about the cost of its high-tech investments, Alphabet released those figures and it has done no damage to the share value. Alphabet has acquired over 180 companies, the largest being Motorola, the mobile phone manufacturer, for $12.5bn. The increasing value of pay-per-click revenues (up 31% over the web, and up 40% on Google-owned sites) is a promising sign for the company, especially as mobile ad clicks rise in value, after a slow start.

The ‘Google arm’ of Alphabet manages its search functionality, Google Maps, the Chrome browser, the Android phone operating system, and YouTube. It’s ‘moonshots’ (the more unusual projects, such as extending life and researching robotics) are costing more money than they make, with some projects – Google Glass being a prime example, and the failed experiment of the social networking site Google Plus – costing a lot of money with little return.

However, investors are clearly keen to back Alphabet in its entirety, trusting that one or more of the experimental investments will eventually result in considerable income and success.

In the UK, Alphabet’s revenues rose to $1.92bn, a 16% increase. In this country, the company is currently caught up in a tax controversy, having agreed to pay just £130m in tax for the years since 2005.

Prior to this recent event, Apple was the most valuable company in the world for the majority of the time since 2010. Prior to that, it was Microsoft, which overtook IBM twenty years previously.