Wall Street Horizons’ Head of Global Corporate Events Research Christine Short appeared on BNN Bloomberg to discuss tech company earnings amid Alphabet and Tesla repo.
(Bloomberg) — Google parent Alphabet Inc. reported second-quarter revenue that beat analysts’ expectations, helped by rising demand for its cloud-computing services and search engine advertising.
The company also provides cloud-computing services to fast-growing startups, helping to drive steady profitability for that business after years of losses.
Google was once ahead in the AI race because it developed much of the technology underlying popular chatbots. The company is now looking to prove it can hold its own against companies like OpenAI and Microsoft, which are pushing chatbots that try to lure people away from traditional web searches and answer users’ questions in a conversational way. Google has rushed to build artificial intelligence into all of its widely used products, including Gmail, Google Docs and search, with sometimes mixed results.
The company also provides cloud-computing services to fast-growing startups, helping to drive steady profitability for that business after years of losses.
“Our strength in AI, AI infrastructure and generative AI solutions for our cloud customers certainly helps,” Alphabet Chief Investment Officer Ruth Porat said in a media call. “Our customers are certainly relying on us to build out their own capabilities.”
Alphabet’s shares were initially volatile but rose about 1% in after-hours trading following the news, and are up 30% so far this year.
Google Cloud earned $1.17 billion, beating analysts’ expectations of $982 million in operating profit. Google still lags Amazon.com Inc. and Microsoft Corp. in the cloud-computing market, but the unit has won business from artificial intelligence startups over the past year. Investors are also eyeing Google Cloud as the division with the most potential for growth across Alphabet, especially as its search business matures.
Search advertising revenue for the quarter was $48.5 billion, beating analysts’ average estimate of $47.6 billion.
YouTube reported revenue of $8.66 billion, compared with the $8.95 billion that analysts had averaged expected. Of Alphabet’s various businesses, YouTube is the one most vulnerable to fluctuations in the digital advertising market.
Alphabet’s “other investments,” a collection of breakthrough business units including life sciences business Verily and self-driving car maker Waymo, earned $365 million in revenue but posted an operating loss of $1.13 billion, bigger than analysts’ projections for a loss of $1.07 billion. Alphabet has recently been pushing for these units to be spun off as independent startups rather than become divisions of the parent company.
In its latest filing, Alphabet reported that it had $100.7 billion in cash, cash equivalents and marketable investments, down from $108 billion in the first quarter.In recent months, Google has expressed interest in acquiring two companies, both of which would have been the internet giant’s largest acquisitions ever, but both deals fell apart.The acquisitions of HubSpot and Wizz were supposed to bolster the company’s cloud and cybersecurity offerings and help it compete with tech rivals.
“We are always looking for opportunities to diversify our portfolio and will continue to do so if we find the right combination of factors, including value,” Porat said, while declining to comment on the negotiations with Wizz. “Regulatory scrutiny is not new to us and we have successfully managed regulatory review of a number of larger transactions in the past.”
Later this month, veteran Eli Lilly & Co. executive Anat Ashkenazi will join the search giant as its chief financial officer. Porat, Alphabet’s longest-tenured CFO, will stay on as president and chief investment officer and spend more time considering the company’s other investment portfolios.
