Alphabet earnings surpass market expectations

Google’s parent company; Alphabet, reported Q2 earnings on Tuesday, beating expectations on both the top and bottom lines, sending the stock up as much as 6% in after-hours trading. Google ad revenues totaled $58.14 billion in the quarter, better than the $57.5 billion expected and $56.3 billion reported in the same period last year. YouTube ad revenues also topped estimates, reaching $7.66 billion against forecasts for $7.41 billion. In the prior year period, YouTube ad revenue totaled $7.34 billion.

Alphabet reported revenue of $74.6 billion, beating expectations for $72.75 billion and reporting earnings per share of $1.44, more than the $1.32 expected by analysts. Alphabet also announced its CFO Ruth Porat would take the newly created role of president and chief investment officer.

For the quarter, Alphabet’s operating profits came to $21.8 billion. The next generation of Search is being driven by the company’s sustained leadership in AI as well as its superior engineering and innovation capabilities. In the most recent quarter, the company’s Other Bets division, which Porat will oversee in her new position, posted an operational loss of $813 million, which was less than the $1.34 billion loss experienced in the same period previous year. These improvements across the board in ad and cloud revenue can be attributed to Google’s cost-cutting initiatives from this year and the previous year, the most well-known of which saw Alphabet in January announcing plans to lay off 12,000 employees.

Google has discussed its ideas with leaders in the news industry and is currently developing artificial intelligence technologies to assist journalists in creating stories and headlines. Concerns about whether the quickly developing technology can be relied upon to deliver accurate news and whether it will ultimately result in human journalists losing their jobs in a sector that is already experiencing financial hardship have also been raised.

Investors are watching for mentions of Alphabet’s AI initiatives on the company’s results call; AI has been a general tech tailwind in recent months, and Alphabet is particularly and inexorably associated with it. Since 2022, Microsoft (MSFT), which rebuilt its Bing search engine after increasing its investment in ChatGPT developer OpenAI, and Alphabet have been locked in an AI stalemate. According to reports, Sergey Brin, a co-founder of Google, has increased his involvement as Alphabet looks to raise its AI game.

Recently, regulators have also targeted Alphabet and Big Tech as a whole. On the call, analysts and investors should expect to hear some discussion of this. The European Commission, the top regulatory body in the European Union, wants to split up Alphabet’s ad tech division. Additionally, Alphabet is negotiating AI safety nets with EU regulators. The US Department of Justice filed a lawsuit against Google in January, claiming the firm had a monopoly on online advertising.