Alphabet comes before Apple

Google's market capitalisation will soon surpass Apple's, despite the fact it makes less profit in a year than Apple does in a quarter. Marcio Jose Sanchez

by Financial Times Unless the market sobers up, Google's market capitalisation will soon surpass Apple's for the first time since 2010.
The real re-rating occurred in 2015, with Google's addition of a new chief financial officer. Hopes for cost control and transparency, under the new brand of Alphabet, followed Ruth Porat's arrival.
Reality on those fronts is less than the hype. Operating expenses dipped to 36 per cent of revenue in fourth-quarter results. But apart from in 2014, the ratio was lower than 35 per cent in every quarter for the past 10 years. Nor is there any guarantee that spending is on an altered trajectory. In fact, there were repeated warnings that capital expenditure could rise.
The vaunted segment reporting provides only two parts: Google; and a division known winsomely as "other bets", which lumps together self-driving cars, smart-home device maker Nest, fast-internet provider Fiber and anti-ageing division Calico. Apple, known as a fortress of secrecy, provides five reporting lines.

The real benefit is that the core business can now be appreciated in all its glory. Set aside the "moonshots", which, it turns out, reduce net income by $US3 billion a year, and the search division is doing very nicely indeed.
The big fear for Google was that it would struggle with the transition to the mobile internet: would users neglect to type search queries into a small screen and would they spend their time in apps, which are hard for Google to monetise? The evidence is reassuring. Paid clicks increased at an accelerating rate of 31 per cent year on year. Revenue from product listing advertisements was greater on mobile than desktop in the main US shopping period.
Alphabet still makes less profit in a year than Apple does in a quarter. The market cap milestone can be justified only if Apple deteriorates more than forecast. Alphabet is not going to cut costs enough to close the profit gulf quickly, but at least it is searching for and finding top-line growth.