Google parent Alphabet Inc. reported second-quarter revenue that beat analysts’ expectations, boosted by demand for cloud computing services and search engine advertising.
Second-quarter sales, excluding partner spending, were $71.36 billion, the company said in a statement on Tuesday. Analysts expected the dollar to hit $70.7 billion, according to data compiled by Bloomberg. Net income per share was $1.89, compared with Wall Street expectations of $1.84 per share.
Google was once a leader in the artificial intelligence race because it developed much of the technology that powers popular chatbots. Now, the company aims to prove it can withstand competition from the likes of OpenAI and Microsoft Corp. as they try to move people away from traditional web searches with chatbots that can answer user questions in a conversational manner. Google has rushed to incorporate artificial intelligence into all of its widely used products, including Gmail, Google Docs and Search, but has sometimes produced mixed results.
It also provides cloud computing services to fast-growing startups, bringing them continued profitability after years of losses.
Ruth Porat, Alphabet’s chief investment officer, said in a phone interview with the media: “We have certainly seen our progress in artificial intelligence, artificial intelligence infrastructure and generative artificial intelligence solutions for cloud customers. “Customers will undoubtedly turn to us when it comes to empowering themselves. “
After initial volatility, Alphabet shares were up about 1% in intraday trading following the report. The stock is up 30% so far this year.
Google Cloud achieved a profit of US$1.17 billion, exceeding analysts’ expectations of US$982 million in operating income. Google still lags behind Amazon and Microsoft in the cloud computing market, but over the past year the unit has attracted business from artificial intelligence startups. Investors also view Google Cloud as the unit with the greatest potential to drive Alphabet’s overall growth, especially as its search business matures.
Quarterly search advertising revenue was $48.5 billion, compared with the average analyst forecast of $47.6 billion.
YouTube reported revenue of $8.66 billion, compared with analysts’ average estimate of $8.95 billion. Of Alphabet’s various businesses, YouTube is the most vulnerable to fluctuations in the digital advertising market.
Alphabet’s other bets – a series of moonshots including life sciences business Verily and self-driving car project Waymo – brought in $365 million in revenue while posting an operating loss of $1.13 billion. That was larger than the $1.07 billion loss analysts had forecast. Alphabet has recently put pressure on it to spin off as an independent startup rather than becoming a business unit of its parent company.
Alphabet said in its latest report that it had $100.7 billion in cash, equivalents and marketable investments, down from $108 billion reported in the first quarter. In recent months, Google has shown interest in acquiring two companies, either of which would have been the largest acquisition ever for the web giant — but both deals fell through. The acquisitions of HubSpot Inc. and Wiz Inc. will bolster the company’s cloud and cybersecurity offerings and help it compete with technology rivals.
“We are always looking for good opportunities to diversify our portfolio and if we find the right combination of factors, including value, we will continue to do so,” Porat said, without commenting on Wiz’s negotiations. “Regulatory scrutiny is not new to us and we have successfully managed regulatory scrutiny on a number of large transactions in the past.”
Later this month, veteran Eli Lilly & Co. executive Anat Ashkenazi will join the search giant as chief financial officer. Porat, Alphabet’s longest-serving financial officer, will continue as president and chief investment officer to spend more time on the company’s other portfolios.
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