Alphabet beat second-quarter revenue and profit estimates on Tuesday, according to a leading tech market analyst.
The company’s performance was driven by a rise in digital advertising sales and healthy demand for its cloud computing services, though it cautioned that capital expenses would remain high for the year.
Reuters reported that the popularity of the Paris Olympics and elections in countries like the US has boosted digital ads, which are witnessing robust demand. This is supported by a rebound in enterprise spending that has again boosted the company’s software business.
Generative AI technology has significantly increased its cloud business.
The company’s main revenue source, advertising, increased by 11% to $64.6 billion, supported by rich consumer data that enables profitable ad targeting features in all of Google parent Alphabet Inc.’s platforms. During the quarter ending June 30, net income grew by 28.6% compared to last year and was higher than analysts’ predictions of around $22.9 billion; net profit eventually came in closer to $23.6 billion.
Shares initially jumped by about 2% but then fell back, posting a similar percentage gain on the day. Still, they are up over 30% year-to-date, compared to a gain of about 20% in the tech-heavy Nasdaq Composite Index.
“The was another stellar quarter from Google with beats in the board,” said Ido Caspi, a research analyst with Global X, citing ad sales and artificial intelligence offerings as key drivers.
Total revenue grew by 14% to $84.74 billion, compared with analysts’ consensus estimate of $84.19 billion, according to LSEG data. Ad sales in its YouTube division rose by 13% to $8.67 billion.
Revenue from cloud computing services, a critical indicator of enterprise technology spending, rose by 28.8% to $10.35 billion, exceeding analysts’ expectations of $10.16 billion.
Alphabet spent $13 billion in capital expenditures during the quarter ended June. Alphabet did not immediately respond to a request for comment. Ruth Porat, in her final conference call as Alphabet’s chief financial officer, said that quarterly capital expenditures through the rest of 2024 would be at or above $12 billion.
In the January-March period, the company’s capital expenditures had surged by 91% to $12 billion, causing concern among investors. Like its competitors, Alphabet is rapidly rolling out AI offerings as investors continue to pour billions into the technology.
However, its AI searches have yielded some embarrassing results, with the company pulling back on the technology in May to address these issues. AI will be introduced in more countries, Alphabet CEO Sundar Pichai told investors on a call recently. “You’ll see us expand the use cases around it.”
Pichai, without providing a timeline, said AI products could soon drive revenue rather than just helping companies through cost-cutting.
Despite increased regulatory scrutiny, Google had been pursuing its largest acquisition ever, a roughly $23 billion buyout of cybersecurity firm Wiz. However, Wiz informed employees on Monday that it was walking away from the deal and would instead pursue going public.
Google also held talks to acquire customer relationship management firm HubSpot before abandoning the deal earlier this month. The agreement would have turned Alphabet into a rival of Salesforce, Oracle, and others.
Google announced on Monday that it plans to keep third-party cookies in its Chrome browser, reversing its previous pledge to phase out the code used to track internet activity. This marked a significant reversal after advertisers expressed concerns that the loss of cookies would limit their ability to collect and parse information for personalising ads, making them dependent on Google’s user databases.
Sales for the Mountain View, California company’s so-called “other bets” company that oversees experimental projects and self-driving car unit Waymo, rose by 28% to $365 million. Porat said the company is planning a multi-year $5 billion investment in Waymo, as rival Cruise slowly returns to US roads after a highly publicised accident in October.
See also: Google’s global expansion: Investing in geothermal energy in Nevada and a major data centre in Malaysia
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