Google's Parent Company Alphabet Surpasses Q2 Revenue and Profit Expectations with Strong Ad Sales and Cloud Growth

Initially, Alphabet’s shares increased by 2% but then fell by the same percentage.

KEY TAKEAWAYS

• Alphabet reports an increase in revenue and profit beyond expectations.

• The growth in demand for digital ads was mainly assisted by events such as the Paris Olympics and political campaigns in the US.

•  Alphabet’s advertising sales, went up by 11% to $64.6 billion, while the net income increased by 28.6% to $23.6 billion. 

Alphabet Inc. (GOOGL.O), which owns Google, posted positive results in Q2 of the year, achieving revenues and profits above market forecasts. This was mainly due to growth in digital ads revenues and a strong demand for the company’s cloud-computing products. The company also said that capital expenditure would still be high in the year.  

The growth in demand for digital ads, assisted by events such as the Paris Olympics and political campaigns in the US and other countries, played a major role in Alphabet’s positive performance. Plus, there has been an increase in the spending by large enterprises, which has also helped the company’s business.  

Another major factor accelerating its cloud business was the increased usage of generative AI. Alphabet's core business, advertising sales, went up by 11% to $64.6 billion, while its net income increased by 28.6% to $23.6 billion.

Investors’ response to these findings was mixed. Initially, Alphabet's shares increased by 2% but then fell by the same percentage. The stock has risen by over 30% this year, outperforming the Nasdaq Composite Index of technology companies, which has only risen by 20%. Turnover increased by 14% and was worth $84.74 billion, exceeding the analysts' estimate of $84.19 billion.  

Another indicator of the state of IT spending, revenue from cloud computing services, went up by 28. 8% to $10.35 billion, which is much higher than the market experts estimated $10.16 billion.  

Alphabet is also improving its AI services as competition heats up and spending on AI is on the rise. However, there have been some concerns with its service so far; for example, Google had to halt its AI to fix a few slips after it recommended applying glue to the pizza to hold the cheese. Despite this, CEO Sundar Pichai remains bullish and says the technology will be introduced to more countries and that its use will be increased.  

While facing more regulatory pressure than ever, Google decided to go for its biggest deal ever, offering $23 billion for the cyber-security company Wiz. But Wiz refrained from the acquisition and opted to go public.  

Also, Google recently decided to abandon its plans of discontinuing the use of third-party cookies in its Chrome browser due to the pressure from advertisers complaining that they would lose the potential to gather and target data.