Google parent company Alphabet beat expectations for its fourth quarter earnings Monday, with about 83 percent of the company's revenue to come from Google’s ad system, mobile search and YouTube.
The company reported profit of $8.9 billion on revenue of $39.3 billion. Its revenue grew more than 21 percent from $32.3 billion a year ago.
Alphabet's advertising commissions, or the money it pays other companies to direct people to its search, grew to $7.4 billion from $6.5 billion a year ago.
Revenue from advertising topped out at $32.6 billion compared to the previous quarter, which came in at $28.95 billion.
Operating losses for Google’s Other Bets, such as Google Fiber and its health-based Verily, increased from $748 million in Q4 2017 to $1.33 billion in Q4 2018.
Profit margins for Google have grown slimmer as the company has looked to expand more into the hardware space it its own smartphones and smart speakers, and pushed deeper into the cloud computing market to compete with Amazon and Microsoft.
Partly because of the higher spending, Alphabet reported an operating margin of 21 percent in the fourth quarter, down from 24 percent a year ago.
The company had $31.07 billion in total fourth-quarter costs and expenses, up 26 percent from last year. Capital expenditures rose 64 percent compared to last year, up to $7.08 billion.
Alphabet said increased operating costs stemmed from licensing content for YouTube, expanded data center operations and Google’s hardware business.
"In 2018 we delivered strong revenue growth, up 23% year over year to $136.8 billion, and up 22% for the fourth quarter to $39.3 billion," said Ruth Porat, Chief Financial Officer of Alphabet and Google. "With great opportunities ahead, we continue to make focused investments in the talent and infrastructure needed to bring exceptional products and experiences to our users, advertisers and partners around the globe."