Alphabet Inc. reported quarterly sales that beat Wall Street estimates, buoyed by heavy digital advertising spending during the holiday shopping quarter. The shares jumped 7 per cent in extended trading.

Fourth-quarter revenue, excluding payments to distribution partners, came in at US$46.43 billion, the Mountain View, California-based company said in a statement. Analysts, on average, expected US$44.2 billion, according to data compiled by Bloomberg.

Online ad sales have rebounded since the early days of the pandemic, when the economy faltered and marketers pulled back. Analysts expected Google to benefit from increased online search activity and YouTube viewership while people remained stuck at home to curb the spread of the virus.

The performance “was driven by Search and YouTube, as consumer and business activity recovered from earlier in the year,” Ruth Porat, chief financial officer of Alphabet and Google, said.

YouTube ad revenue jumped 46 per cent to US$6.9 billion. Wall Street was looking for US$6.2 billion. Search and other related businesses generated revenue of US$31.9 billion, up 17 per cent from a year earlier.

Dan Morgan, a portfolio manager at Synovus Trust Company, said the results show Alphabet is capable “of delivering strong profit growth despite their behemoth girth.”

Last week, Facebook Inc. reported surging revenue growth after online shopping boosted the digital ads market. That spurred additional gains in Alphabet shares, which have climbed more than 10 per cent so far this year.

Alphabet Chief Executive Officer Sundar Pichai is trying to rely less on Google’s main search advertising business, and he has been focusing on cloud computing as a way to diversify. The company trails Amazon.com Inc. and Microsoft Corp. in this market, where computing power, data storage and software services are rented over the internet.

 “The past year also accelerated the shift to cloud, and adoption of online services,” Pichai said on a conference call with analysts. “This has profound implications for all companies and consumers and we’re pleased that so many trust us to help make this transition.”

Google said the cloud division had an operating loss of US$1.24 billion in the fourth quarter. Analysts keenly awaited this new metric and some were expecting an operating profit.

Net income was US$15.2 billion, or US$22.30 a share, in the fourth quarter, compared with US$10.7 billion, or US$15.35 a share, a year earlier.