news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

Alphabet, the parent company of tech giant Google, reported second-quarter revenue that exceeded expectations, but capital expenditures also remained high.

After the U.S. stock market closed on July 23, local time, Google's parent company Alphabet released its second quarter 2024 financial report ending June 30. The financial report shows that Alphabet's second quarter revenue was $84.742 billion, a year-on-year increase of 14%, higher than analysts' expectations of $84.19 billion; non-GAAP net profit was $23.619 billion, a year-on-year increase of 28.59%; diluted earnings per share was $1.89, the same as the previous quarter, higher than the market expectation of $1.85.

Google CEO Sundar Pichai said: "Our outstanding performance this quarter highlights the continued strength of our search business and the momentum of our cloud business. We are innovating at every layer of the AI ​​(artificial intelligence) stack. Our leadership in long-term infrastructure and internal research teams help the company drive technological evolution and pursue future opportunities."

Ruth Porat, CFO of Alphabet and Google, said the company's operating profit exceeded $1 billion for the first time this quarter, and the company will continue to be committed to enhancing its investment capabilities by continuously restructuring its cost base.

Google's second quarter performance highlights. Source: Google earnings report

On the 23rd, Google (Nasdaq: GOOG) stock closed at $181.79 per share, with a total market value of $2.26 trillion. After the financial report was released, it rose by more than 2%, but then fell by more than 1.5%. Wind data shows that Google's stock price has risen by more than 30% since the beginning of this year.

Cloud business revenue exceeds $10 billion for the first time

In terms of business, Google's two core businesses are advertising and cloud. In the second quarter, Google's advertising business grew from $58.143 billion last year to $64.616 billion, higher than the market expectation of $64.5 billion. The company's largest business unit, Google Search, saw revenue increase from $42.628 billion in the same period last year to $48.509 billion, a year-on-year increase of 13.80%; however, advertising revenue from its video site YouTube increased from $7.665 billion in the same period last year to $8.663 billion, a year-on-year increase of 13%, lower than the market expectation of $8.93 billion.

In terms of cloud business, Google Cloud's revenue exceeded $10 billion for the first time, increasing from $8.031 billion in the same period last year to $10.347 billion, a year-on-year increase of more than 28%, higher than the market expectation of $10.1 billion, indicating that the company's heavy investment in the field of AI has produced objective returns. Pichai said in a conference call after the earnings report that more than 1.5 million developers are using its large model Gemini series of tools.

Google's non-core business unit (Other Bets) had revenue of $365 million this quarter, up from $285 million in the same period last year. Porat announced in a earnings call that the company will make a multi-year $5 billion investment in Waymo, a subsidiary that develops fully autonomous vehicles. According to Pichai, Waymo has 50,000 paid trips per week (Editor's note: The taxi app Waymo One provides fully autonomous driverless taxi services, namely Robotaxi).

In addition, after several waves of layoffs, the number of Google employees has dropped from 181,798 in the same period last year to 179,582.

Google's second quarter business performance. Source: Google financial report

The third quarter operating profit margin may be affected

It is worth noting that Google's capital expenditure in the second quarter reached $13 billion, and it is expected that the quarterly capital expenditure in the remaining two quarters of this year will reach or exceed $12 billion. In the post-earnings conference call, Google pointed out that although the operating profit margin reached 32% in this quarter, the operating profit margin in the third quarter may be affected due to the increase in investment in technology infrastructure and the increase in operating costs caused by hardware releases.

Speaking of the company's AI Overview feature, which was partially shut down after it was launched on the search engine due to too many wrong answers, Pichai said that the feedback on the product was generally positive and the company "will definitely expand its scale this year", but will also "focus on quality". Google plans to start testing new ways of presenting ads in AI Overview later this year.

In addition, this meeting was also the last post-earnings call for the company's current CFO Porat, who will soon become the company's president and chief investment officer. Anat Ashkenaz, formerly the CFO of pharmaceutical giant Eli Lilly & Co., will become Google's new CFO.

Some analysts hope that Ashkenazi will provide more guidance on future performance after taking office. However, "discussing only the long-term trend of the business" is a company tradition that Google's founder has already proposed when it went public in 2004.

After the earnings report was released, Brent Thill, an analyst at investment bank Jefferies, said the company's fundamentals remain healthy: "However, it is too early to expect benefits from AI, as most companies are still in trial mode, and substantial AI revenue is more likely to be achieved in 2025-2026."

Scott Devitt, an analyst at US investment bank Wedbush, is also optimistic about the strong growth momentum of Google Search, believing that the AI ​​overview function can increase user engagement and may become a driving force for the monetization of the search business in the future.

However, KeyBanc, a financial services company in Portland, Oregon, pointed out in its analysis that Alphabet still faces uncertainties such as the U.S. Department of Justice's antitrust lawsuit that will go to trial in September, the upcoming U.S. presidential election, and the seemingly endless huge capital expenditures related to AI.

In this financial report, Google did not mention information about dividends and stock repurchases. Previously, in the first quarter financial report released in April this year, Google announced that it would pay dividends for the first time in the company's history on June 17, including Class A, Class B and Class C shares registered as of June 10, 2024, with a cash distribution of $0.20 per share. In addition, the board of directors has authorized the repurchase of no more than $70 billion of Class A and Class C shares.

Before the release of the financial report, on July 23, cloud security startup Wiz announced that it would reject Google's acquisition proposal and proceed with its initial public offering as originally planned. Previously, Google announced that it would acquire the company for $23 billion, nearly double the $12 billion valuation of Wiz in its latest round of financing. Industry insiders pointed out that Wiz's rejection of Google's acquisition was partly due to concerns about antitrust lawsuits and the pessimism of some investors.

Google also said on the 22nd that it would end its plan to phase out third-party cookies in the Chrome browser. After a series of setbacks, Google decided to keep this common information tracking technology called cookies. Subsequently, the UK Information Commissioner's Office (ICO) issued a statement saying that it was disappointed with Google's change of plan and would consider taking action.