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Why Alphabet is overtaking Apple in value

In after-hours trading on Monday, Google's parent Alphabet (GOOGL) passed Apple (AAPL) in terms of total market capitalization, becoming -- at least for a while -- the world's most valuable publicly traded company. Following Alphabet's better-than-expected quarterly results, its shares rose more than 9 percent at one point, later trimming the gains to about 4.6 percent.

Simply reorganizing how Alphabet's results were reported -- dividing core Google results from so-called "moonshot" activities like automated vehicles -- as well as ongoing strength in digital ad revenue helped do the trick.

Many investors remember the accounting gimmickry that led to the Enron fiasco. And we continue to see shades of this in the way companies like Alcoa (AA) over-rely on "one-time" restructuring charges to mask industrywide woes or how Tesla (TSLA) relies on pro-forma revenue recognition to juice results.

But this is an example of how changes in the way the corporate beans are counted actually benefited regular investors.

Earnings came in at $8.67 per share (vs. $8.17 expected), while revenues totaled $17.3 billion (vs. $16.9 billion expected), up 19 percent. Paid-click ad revenue increased 31 percent over last year, but the aggregate cost per click dropped 13 percent. Net operating cash flow totaled $6.4 billion, thanks to a slowdown in capital spending.

Revenue for the Google operating segment totaled $21.2 billion vs. $18 billion last year. On the earnings call, management noted that the increased use of mobile search was the single largest contributor to the robust quarter.

Data curated by FindTheCompany

While Apple still enjoys a larger cash pile than Alphabet (more than $200 billion vs. $73 billion, respectively), the latter's market capitalization (shares outstanding multiplied by the share price) is now roughly $570 billion vs. $535 billion for Apple. The last time Alphabet's corporate predecessor, Google, was more valuable than Apple was in February 2010, when both were worth less than $200 billion. That was before the iPad and before the iPhone 4 established Apple's dominance in mobile computing.

In 2011, Apple passed Exxon Mobil (XOM) to become the world's largest company.

Now, with the smartphone and tablet markets saturated, and Apple lagging behind peers in new-tech areas like virtual reality and autonomous transportation, Alphabet has retaken the crown not because of the successes of its Android mobile software or Nexus mobile hardware but because of its growing share of the mobile ad market.

According to eMarketer, Google is poised to take 32 percent of the mobile ad market this year ahead of Facebook (FB) at 20 percent.

In fact, the importance of commanding the mobile ad market can be seen in the way Facebook passed Exxon Mobil on Monday to becomes the world's third-most-valuable company.

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