Alphabet - Google Corporate Headquarters in Mountain View, California.
Google Corporate Headquarters in Mountain View, California.
Source: wolterke.
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  • Alphabet stock (NDAQ:GOOG) soared after posting net income of US$18.37B in Q2, well ahead of US$16B in Q2 2022 and the US$16.9B expected by Wall Street
  • The outperformance stems from rising demand in ads and cloud computing, as new, broad-based AI integrations hold promise for the future
  • Alphabet is one of the world’s largest diversified technology companies
  • Alphabet stock (NDAQ:GOOG) opened with a gain of 6.84 per cent trading at US$131.19 per share

Alphabet stock (NDAQ:GOOG) soared after the Google parent posted net income of US$18.37B in Q2, well ahead of US$16B in Q2 2022 and the US$16.9B expected by Wall Street.

The company attributes its performance to rising cloud and ad sales, which added 28 and 3.3 per cent year-over-year (YoY).

Google’s cloud unit turned an operating profit for the first time in Q1 with US$395M YoY, up from a loss of US$590M. This is from a base of US$8.03B in revenue, up from an expected US$7.87B.

Ad revenue came in at US$58.14B, up from US$56.29 billion last year, with YouTube ads posting US$7.67B, up from US$7.34B the year prior. 

Revenue from Google ads, YouTube ads and Google Cloud exceeded analyst forecasts.

Consistent demand for cloud services, coupled with a bounce-back in ad sales coinciding with easing inflationary conditions, led to Google’s fourth consecutive quarter of single-digit growth, a far cry from 2021’s annual total of 41 per cent.

That said, the company expects double-digit growth to return in Q4, marked by clients’ confidence in its established search presence, as well as most of the costs related to cutting its workforce by 12,000 having been taken in Q1.

Moving forward, investors will have a keen eye on the impact of Alphabet’s generative AI investments and additional cost-cutting measures announced earlier this year.

Accounting for the majority of capital spending in Q2 – without counting servers – the company’s forays into AI include integrations into its search engine, Android mobile operating system, and popular products like Gmail and Google Photos. It also launched a chatbot called Bard in February to compete with OpenAI’s ChatGPT.

Generative AI’s ability to create text, images and video with a human touch and in a fraction of the time is seen by many as the future of productivity and content development.

Investors will also be focused on Alphabet’s new AI-powered advertising capabilities, which promise to jumpstart and streamline the campaign building process.

Key quarterly figures and updates

  • Revenue grew by 7 per cent year-over-year from US$69.7B to US$74.6B
  • Earnings per share of US$1.44 per share, up from the US$1.34 per share expected by Refinitiv
  • Operating margin of 29 per cent, up 1 per cent YoY and 4 per cent from Q1
  • Google’s Other Bets portfolio, which focuses on high-risk hardware and service opportunities, including Waymo self-driving cars and the Verily life sciences unit, increased revenue by 48 per cent to US$285M while posting a loss of US$813M, up from a loss of US$1.34B in Q2 of last year
  • After eight years as CFO, Ruth Porat will transition into the new role of president and chief investment officer

Alphabet is one of the world’s largest diversified technology companies.

Alphabet stock (NDAQ:GOOG) added 6.09 per cent in extended trading Tuesday. It opened Wednesday with a gain of 6.84 per cent trading at US$131.19 per share. The stock is up by over 20 per cent YoY.

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