Alphabet beats Q2 earnings predictions

Google’s parent company, Alphabet, has beaten second-quarter revenue and profit estimates owing to a rise in digital advertising sales and a healthy demand for its cloud computing services. 

 

Total revenue increased by 14% to $84.74 billion, beyond the $84.19 billion analysts had projected. Meanwhile, net income saw a 28.6% increase to $23.6 billion, exceeding Wall Street’s expectation of $22.7 billion.

 

Alphabet's primary income stream, advertising sales, increased 11% to $64.6 billion. The company sells ads in its search product using customer data to better target them.

 

The Paris Olympics and elections in many countries, including the US, have created a strong demand for digital advertisements, as demonstrated by the results. Meanwhile, its software business is growing due to an increase in enterprise spending.

 

Despite falling somewhat short of projections, ad sales in Alphabet's YouTube division rose 13% to $8.67 billion (against analyst estimates of $8.93 billion) over the previous year thanks primarily to direct response and brand advertising.

 

Cloud computing services revenue increased over $10 billion for the first time, rising 28.8% to $10.35 billion. $10.16 billion was what analysts had predicted. Its cloud business was driven by a strong adoption of gen AI technology.

 

 

The company has incorporated gen AI into all of its products and increased spending in the area, but its AI offerings have not been without stumbles. There was a botched roll out of Google's Gemini AI image-generator tool earlier this year that sparked a fierce backlash and prompted top officials to retract their statements after users discovered that the tool had placed people of colour in historically inaccurate roles, such as German troops in World War II.

 

Nevertheless, Alphabet's CEO, Sundar Pichai, said on a conference call following the earnings results that AI efforts were "driving new growth."

 

“Year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than two million developers,” he said. He added that the company was “seeing great progress with AI Overviews,” which are answer summaries featured in search results.

 

However, AI Overviews have also been criticised by users who discovered several radically incorrect findings, such as suggestions that people eat rocks, as well as by publishers who claimed that it would decrease traffic to their websites.

 

On Monday, the cybersecurity start-up Wiz turned down Google's $23 billion buyout offer after deciding to go public instead, which was a blow to the company's hopes for growing its cloud computing business.

 

Meanwhile, Google announced on Monday that, after years of promises to phase them out, it will continue to allow third-party cookies in its Chrome browser backtracking function. It was a significant turnaround following worries raised by advertisers that their capacity to gather and process data for customised adverts would be restricted by the removal of cookies, leaving them reliant on Google's user databases.