GOOGLE parent Alphabet reported second-quarter revenue that beat analysts’ expectations, boosted by demand for cloud-computing services and advertising on its search engine.
Sales, excluding partner payouts, were US$71.36 billion in the second quarter, the company said on Tuesday (Jul 23). Analysts had projected US$70.7 billion, according to data compiled by Bloomberg. Net income was US$1.89 per share, compared with Wall Street’s US$1.84 per share estimate.
Google once had a head start in the artificial intelligence (AI) race because it developed much of the technology underpinning popular chatbots. Now, the company aims to prove that it can withstand competition from the likes of OpenAI and Microsoft as they try to draw people away from traditional web search, pushing chatbots that can answer users’ questions in a conversational fashion. Google has rushed to weave AI into all of its widely-used products, including Gmail, Google Docs and search, occasionally with mixed results.
It’s also providing cloud-computing services to fast-growing startups, fuelling consistent profitability for that business after years of losing money.
“We have certainly seen the benefit of our strength in AI, AI infrastructure, as well as generative AI solutions for cloud customers,” Alphabet chief investment officer Ruth Porat said. “There is no question customers are turning to us as they are building out their capabilities.”
After initially fluctuating, Alphabet shares were up about 1 per cent in extended trading following the report. The stock has gained 30 per cent so far this year.
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Google Cloud brought in a profit of US$1.17 billion, beating analysts’ estimates for operating income of US$982 million. Google still trails behind Amazon.com and Microsoft in the cloud computing market, but in the past year, the unit has attracted business from AI startups. Investors are also eyeing Google Cloud as the unit with the most potential to grow Alphabet overall, especially as its search business matures.
Quarterly search advertising revenue was US$48.5 billion, compared with the average analyst projection for US$47.6 billion.
YouTube reported US$8.66 billion in revenue, compared with analysts’ average estimate of US$8.95 billion. Of Alphabet’s various businesses, YouTube has been the most vulnerable to swings in the digital-ad market.
Alphabet’s Other Bets – a collection of moonshot units that includes the life sciences business Verily and the self-driving car effort Waymo – brought in US$365 million in revenue while posting an operating loss of US$1.13 billion. That was steeper than analysts’ projection for a loss of US$1.07 billion. Alphabet has recently put pressure on its bets to spin off as independent startups, rather than becoming business units of their parent company.
In its latest report, Alphabet indicated that it has US$100.7 billion in cash, equivalents and marketable investments, down from the US$108 billion it reported in the first quarter. In recent months, Google showed interest in acquiring two companies, either of which would have been the biggest-ever purchase for the Internet giant – but both times, the deals fell apart. The acquisitions, for HubSpot and Wiz, would have strengthened the company’s cloud and cybersecurity offerings, helping it to compete with its tech rivals.
“We are always looking for good opportunities to diversify the portfolio and will continue to do so if we find the right combination of factors, including value,” Porat said, without commenting on the Wiz talks. “Regulatory scrutiny is not new for us, and we have successfully managed regulatory reviews of many large deals in the past.”
Later this month, Anat Ashkenazi, a veteran Eli Lilly & Co executive, will join the search giant as chief financial officer. Porat, Alphabet’s longest serving CFO, will stay on as president and chief investment officer, spending more time working on the company’s portfolio of other bets. BLOOMBERG