Wide-Moat Alphabet Reports Mixed End to 2015

Top line results for the full company were solid with 18% revenue growth (24% on a constant currency basis) driven by strong growth across all geography segments (U.S. up 24%, U.K. up 20% excluding FX, and Rest of the World up 26% excluding FX). Total operating margin improved 100 basis points to 32.0%. Within the Google segment, revenue growth of 18% was driven by 20% growth at Google Sites which more than offset the slower growth at Network Members (7%). Mobile continues to grow as other revenues improved 24%. We believe the investment in Android will pay off not only in driving mobile search, but also in other revenue streams such as the Google Play which increased spend per buyer 30% globally in 2015. Management also disclosed Gmail surpassed 1 billion monthly active users, joining the six other services (Chrome, Search, YouTube, Maps, Android and Google Play) with more than a billion monthly active users.

Within Other Bets, revenue grew 37% for the full year to $448 million, primarily via Nest, Fiber and Verily (life sciences) divisions. The majority of Other Bets businesses are in prerevenue stage and many are moonshots which may never generate revenue. Despite our expectation Other Bets will not meaningfully impact revenue for years, we believe the move to segment reporting allows investors to better gauge the level and success of investments made outside of the core Google business.

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