Alphabet earnings: $8.67 per share, vs expected EPS of $8.10

Alphabet most surprised investors with THIS: Pro
Alphabet most surprised investors with THIS: Pro
Google parent Alphabet tops earnings expectations
Google parent Alphabet tops earnings expectations
Alphabet just surpassed our model: Pro
Alphabet just surpassed our model: Pro

Google parent company Alphabet on Monday posted earnings and revenue that topped analysts' expectations, as advertising drove strong sales growth.

The technology giant reported fourth-quarter earnings of $8.67 per Class A share on $21.33 billion in revenue. Total sales rose 18 percent from the previous year, as advertising revenue climbed 17 percent. Earnings per share rose from $6.76 the previous year.

Analysts expected Alphabet to post earnings of $8.10 per Class A share on $20.77 billion in revenue, according to a consensus estimate from Thomson Reuters.

"Our very strong revenue growth in Q4 reflects the vibrancy of our business, driven by mobile search as well as YouTube and programmatic advertising, all areas in which we've been investing for many years," said Alphabet Chief Financial Officer Ruth Porat in a statement.

The company's board also authorized a buyback of an additional 514,000 shares.

Its shares jumped as much as 9 percent in after-hours trading before giving up some gains. It reached a level at which it would surpass Apple as the most valuable U.S. company by market cap if it opened there on Tuesday. (Click here to track the stock.)

Alphabet began a new reporting method Monday, breaking out results for its main Internet products from those of its newer ventures. The tech giant reported two segments: "Google" and "other bets."

The Google segment included core products like search, cloud software, video platform YouTube and Android software. The other portion is comprised of early stage projects such as the Fiber Internet service, life sciences business Verily and X, a research and development arm. Last week, Alphabet said the changes would "bring increased focus, accountability and transparency to all of our efforts."

For full year 2015, the segment comprised of its newer businesses posted $448 million in sales and an operating loss of $3.57 billion. Its loss widened from $1.94 billion in the previous year.

Still, Google's advertising business drove its sales strength in the fourth quarter. Revenue from advertising climbed to $19.08 billion, up 17 percent from the previous year, as sales for Google websites specifically rose 20 percent.

The Internet giant's aggregate paid clicks, a key advertising metric, increased 31 percent from the previous year, beating consensus expectations of about 22 percent, according to StreetAccount. Aggregate cost per click, though, fell 13 percent year over year.

Total traffic acquisition costs rose to $4.06 billion, slightly higher than analysts expected. However, costs as a percentage of advertising revenue fell to 21 percent from 22 percent in the prior-year period.

Alphabet's operating margin was 32 percent, up slightly from 31 percent in the previous year. Wall Street expected a margin of about 33 percent.

Google Alphabet.
Daniel Acker | Bloomberg | Getty Images

Free cash flow came in at $4.32 billion, up from $2.81 billion in the prior-year quarter.

On Alphabet's earnings call, Google unit CEO Sundar Pichai highlighted growth in the company's Android operating system and hardware as well as software and mobile search. He said Google's Gmail service surpassed 1 billion monthly active users during the fourth quarter.

He also touted advertising spending on YouTube. The company did not report sales numbers for the YouTube business specifically.

"I think at some point investors will put enough pressure on them to release YouTube's results because I think, if you look at the estimates across the Street, they vary across just about every single analyst," said Victor Anthony, an Internet media analyst at Axiom Capital Management, in a CNBC interview on Monday.

Alphabet's stock is among the best performers in the over the last year, rising about 40 percent.