Alphabet surpassed expectations for revenue and profit in the second quarter, driven by increased digital advertising sales and strong demand for its cloud computing services. However, the company cautioned that capital expenses would remain elevated throughout the year.
The results highlight robust demand for digital ads, buoyed by major events such as the Paris Olympics and elections worldwide, alongside a rebound in enterprise spending benefiting its software division. The adoption of generative AI technology significantly boosted Alphabet’s cloud business.
Advertising revenue, Alphabet’s primary income source, grew 11% to $64.6 billion, leveraging customer data to enhance targeting within its search platform.
Net income for the quarter ending June 30 surged 28.6% to $23.6 billion, exceeding the projected $22.9 billion average.
Market reaction was mixed, initially lifting shares by approximately 2% before a slight decline. Alphabet’s stock had risen more than 30% year-to-date, outperforming the tech-heavy Nasdaq Composite Index’s 20% increase.
Ido Caspi, a research analyst at Global X, praised the quarter as “stellar,” highlighting strong ad sales and AI advancements.
Total revenue climbed 14% to $84.74 billion, slightly surpassing analysts’ consensus of $84.19 billion. YouTube ad revenue grew 13% to $8.67 billion.
Cloud computing revenue, a key indicator of enterprise tech spending, jumped 28.8% to $10.35 billion, exceeding expectations of $10.16 billion.
Alphabet reported capital expenditures of $13 billion for the quarter, with CFO Ruth Porat indicating similar high spending levels for the remainder of 2024, following a significant increase in the previous quarter.
Alphabet, like its peers, is aggressively expanding AI offerings amid substantial investor interest in the sector. Despite notable advancements, some AI endeavors have faced challenges, prompting adjustments.
CEO Sundar Pichai confirmed plans to expand AI applications globally, aiming to broaden their utility beyond efficiency improvements to driving revenue growth.
Despite regulatory scrutiny, Alphabet had pursued major acquisitions, including a $23 billion deal for cybersecurity firm Wiz, which fell through in favor of Wiz pursuing a public listing.
Alphabet’s “other bets,” encompassing experimental projects like Waymo, reported a 28% revenue increase to $365 million. The company plans a substantial $5 billion investment in Waymo over multiple years.
In a significant policy reversal, Google announced it would maintain third-party cookies in Chrome, amid concerns from advertisers about data collection limitations.
Alphabet continues to navigate a competitive landscape, recently considering but ultimately backing away from a major acquisition in customer relationship management.
Overall, Alphabet’s second-quarter performance underscores its resilience in digital advertising and cloud services, amid ongoing strategic adjustments and market dynamics.