Alphabet, the parent company of Google, surpassed Wall Street expectations with its second-quarter profit, driven by robust demand for its cloud services and a rebound in advertising. The positive results led to an 8% surge in Alphabet’s shares during after-hours trading.
Despite the excitement around AI, Alphabet’s second-quarter results reaffirmed the importance of ad sales. Google’s video service unit, YouTube, witnessed a 4.4% rise in ad sales, generating $7.67 billion in revenue
The company’s CFO, Ruth Porat, a prominent female executive in Silicon Valley, will assume a new role as chief investment officer and president, effective from September 1. During this transition, she will also lead the 2024 planning while the company searches for a new finance chief.
Investors and analysts were highly impressed by Google’s outstanding earnings per share, especially amid doubts about the company’s ability to compete with other tech giants during the AI boom. Thomas Monteiro, senior analyst at Investing.com, stated that this indicates a potential new growth phase for the tech giant, solidifying its position in the competitive cloud sector and paving the way for further expansion in the AI field.
While the new AI technology represents a significant advancement for Alphabet, it comes with considerable costs. The company’s second-quarter capital spending primarily went into servers and a substantial investment in AI computing. The company also plans to integrate generative AI into various products, including Gmail, Google Photos, and its Android mobile operating system, enabling it to create text, images, and videos that closely resemble human-produced content.
Notably, Alphabet’s cloud business, Google Cloud, recorded impressive growth, with revenue reaching $8.1 billion, surpassing expectations. This segment remains among the largest cloud service providers and maintained its growth rate from the first quarter. Analysts anticipate the cloud business to pick up pace towards the end of the year, following macroeconomic uncertainties.
Investors are confident in the potential of AI becoming a significant growth driver for cloud businesses, with Microsoft’s Azure leading the way, followed by Amazon.com’s AWS and Google Cloud.
Alphabet’s Q2 net profit stood at $1.44 per share, exceeding the estimated $1.34 per share. The total revenue for the quarter reached $74.6 billion, surpassing estimates of $72.82 billion.
The tech industry is closely watching Alphabet’s advancements in AI, which have the potential to revolutionize the landscape of Big Tech. With Ruth Porat’s new role in guiding the company’s investments and initiatives, Alphabet is poised to continue its growth trajectory and solidify its position as a major player in the tech world.