Alphabet reports better-than-expected quarterly results driven by growth in cloud

Alphabet shares rose about 7% in extended trading on Tuesday after the company reported better-than-expected revenue and profit, driven by growth in its cloud-computing unit.

• Earnings: $1.44 per share vs. $1.34 per share, adjusted, expected by Refinitiv.
• Revenue: $74.6 billion vs. $72.82 billion expected by Refinitiv.

The company also reported the following numbers:

• YouTube ads: $7.67 billion vs. $7.43 billion, according to Street Account.
• Google Cloud: $8.03 billion vs. $7.87 billion, according to StreetAccount.
• Traffic acquisition costs:  $12.54 billion vs. $12.37 billion, according to StreetAccount.

Second-quarter revenue rose 7% to $74.6 billion from $69.7 billion in the year-earlier period.

For the fourth straight quarter, Google’s parent company reported growth in the single digits as it reckons with a pullback in digital ad spending that reflects concerns about the economy. Analysts don’t expect growth to hit double digits again until the fourth quarter.

Along with Microsoft, Alphabet kicked off earnings season for the mega-cap tech companies. Across the industry, investors will be looking for updates on cost-cutting measures implemented earlier in the year and the impact of artificial intelligence investments on profitability.

Microsoft on Tuesday topped estimates, though the stock dipped in after-hours trading. Facebook parent Meta reports results on Wednesday, followed by Amazon and Apple next week.

Prior to the after-hours move, Alphabet was up 47% for the year, compared to the 19% gain in the S&P 500.

Revenue in Google’s cloud unit, which includes infrastructure and productivity apps, increased 28%. The division, which turned profitable on an operating basis in the first quarter, reported operating income in the second period of $395 million after losing $590 million a year earlier.

Google’s ad revenue rose 3.3% to $58.14 billion, up from $56.29 billion last year. YouTube ads came in above analyst expectations at $7.67 billion, up from $7.34 billion the year before. The video platform has faced heightened competition from TikTok in short-form videos.

Google’s “search and other” revenue rose to $42.63 billion, up slightly from last year.

Other Bets, which includes the Waymo self-driving car business and the Verily life sciences unit, reported a 48% increase in revenue to $285 million. However, the division still lost $813 million in the period.

Net income rose to $18.37 billion, or $1.44 per share, from $16 billion, or $1.21 per share, during the second quarter of 2022.

Separately, Alphabet said Ruth Porat, the company’s finance chief, will be leaving that role after eight years to assume the newly created position of president and chief investment officer. Porat will remain CFO “while the company searches for and selects her successor,” the press release said. Her new role will include oversight of the Other Bets portfolio.

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