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(Reuters) — Google parent Alphabet on Tuesday reported record revenue for the second straight quarter, despite the pandemic, driving shares up 6% as it topped estimates for both advertising and Cloud sales as customers unleashed budgets for the holidays.

Cutbacks by travel and entertainment advertisers in 2020 were nearly made up as the year went on by new spending from retail clients and others that were driven online by COVID-19 lockdowns.

Google’s advertising business, including YouTube, accounted for 81% of Alphabet’s $56.9 billion in fourth-quarter sales, which rose 23% compared with a year ago.

Google’s Cloud unit also benefited from the pandemic. Google Cloud sales were $3.83 billion, or $13.1 billion for the full year, up 46% from 2019.

Analysts tracked by Refinitiv had estimated quarterly revenue of $53.1 billion and Cloud sales of $3.82 billion.

In a new disclosure, Alphabet said Google Cloud posted an operating loss of $1.24 billion in the fourth quarter and $5.6 billion for 2020, a 21% wider loss than in 2019.

Google, which generates more revenue from internet advertising than any company globally, has long faced questions over whether it can spin the cash from its advertising business into a newly profitable venture. The new financial details suggest that goal may still be years away.

Alphabet’s quarterly profit rose 43% to $15.2 billion, or $22.30 per share, compared with the average estimate of $10.895 billion, or $15.95 per share.

The company said it expects a $2.1 billion boost to operating results in 2021, after a new assessment extended the useful life of its servers and networking gear by a year or more.

Alphabet shares rose 6% to $2,035.95 in after-hours trading on Tuesday. The stock has risen by 9.5% so far this year.

Revenue growth slowing

Though Alphabet increased its cash hoard by $17 billion in 2020 to $137 billion, investors continue to scrutinize its growing expenses.

Alphabet’s costs to license programming for YouTube, operate data centers, and stock consumer products have soared in recent years. Those other costs of revenue now account for about 27 cents for every $1 in sales, up from 23 cents four years ago.

The company’s traffic acquisition costs, which include revenue-sharing agreements with Apple and other companies to distribute Google services, are growing more slowly than the other costs and have steadied at about 18% of sales.

Last year, the company slowed hiring and capital expenditures.

Alphabet’s revenue, which for years had consistently increased by about 20% annually, in 2020 increased by just 12.8%. That marked its slowest growth since 8.5% during the Great Recession in 2009.

The company remains undervalued compared to some rivals. Microsoft shares entering Tuesday traded at 10 times expected revenue over the next 12 months, and Facebook 7 times, while Alphabet shares were about 6 times.

Google’s lead over the global internet advertising market is shrinking as Amazon becomes a bigger threat and China-focused vendors such as Alibaba enjoy a faster rebound from the pandemic. Last week, research company eMarketer estimated Google will capture 30% of the market in 2021 while increasing sales by 18% to $117 billion.

Google is fighting antitrust investigations or charges across Australia, Asia, Europe, and North America.

In addition, Google has threatened to pull its search engine from Australia if the country enforces new rules that would require the company to negotiate fair payments to news publishers to include their content in results.

Analysts have also expressed concern about potential revisions to content moderation laws under new U.S. President Joe Biden. Those laws currently favor companies such as Google.

Alphabet is also monitoring a nascent worker unionization effort and facing ongoing criticism about its underperformance in hiring and retaining women and racial minorities.

(Reporting by Paresh Dave in Oakland, California and Munsif Vengattil in Bengaluru. Editing by Aditya Soni and Matthew Lewis.)

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