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Alphabet’s revenue jumped 14 percent in the second quarter, with double-digit growth in advertising, suggesting that AI chatbots like OpenAI’s ChatGPT have yet to make a dent in queries on the company’s dominant search engine.
Growth was even stronger in cloud computing Enterprises have demonstrated a ravenous demand for computing and data services as large tech companies and startups race to build large, integrated language models. Artificial intelligence into their business.
Revenue rose to $84.7 billion from $74.6 billion in the three months to June, Google‘s parent company said on Tuesday, beating analysts’ average estimate of $84.2 billion. Net income was $23.6 billion, up 28 percent from the same period a year earlier, again narrowly exceeding expectations.
The performance “demonstrates the tremendous momentum underway in search and major advances in the cloud, with our AI initiatives driving new growth,” said chief executive Sundar Pichai. The CEO has faced criticism for moving too slowly to commercialize the big language modeling technology, initially created by Google researchers but popularized by OpenAI, backed through a $13 billion partnership with arch-rival Microsoft.
Alphabet shares, which fluctuated in after-hours trading, have risen by nearly a third this year, giving the company a market capitalization of $2.26 trillion and making it the world’s fourth-most valuable listed company behind Apple, Microsoft and Nvidia.
Advertising revenue — which makes up the bulk of Google’s top line — rose 11 percent to $64.6 billion, in line with consensus forecasts. However, the growth slowed from the previous quarter, disappointing analysts. YouTube ad revenue rose 13 percent to $8.7 billion, while Google Cloud services grew 29 percent to $10.3 billion.
The results “were not as convincing as in the first quarter, when [the earnings] “The beats are broader,” said Jefferies analyst Brent Thill, adding that they “don’t contain excitement.”
Google is one of the first of the Big Seven tech companies to report earnings, so its earnings are closely watched for signs of how the industry’s massive spending on AI is generating increased revenue.
Alphabet’s capital spending increased again to $13 billion, $1 billion more than the previous quarter and nearly double the $6.9 billion it spent in the same period in 2023. That reflects increased investment in data centers, new chips to train and run AI models, and the development of its own AI product suite called Gemini.
“We are at the early stages of a very transformative space. In technology, when you are going through these kinds of transformations… the risk of under-investing is significantly higher than over-investing,” Pichai told analysts. “There is a much more significant downside to not investing to be ahead here.”
Pichai claimed that Google’s generative AI services for customers have generated “billions” in new revenue and are used by 2 million developers.
However, Google has a bumpy began an effort to integrate AI into its products. When AI-generated summaries first started appearing in US search results, they told users that eating rocks could be healthy, advised them to stick cheese on pizza, and called former US President Barack Obama a Muslim.
Earnings come a day after Google abandoned a proposed $23 billion acquisition of Israeli cybersecurity company Wiz, which would be the largest deal in the company’s history.
Board members on both sides were concerned about securing approval from U.S. antitrust regulators, the Financial Times reported. When news of the advanced discussions leaked, skeptics stepped up lobbying against the deal, eventually killing it.
Chief financial officer Ruth Porat declined to comment on why the talks fell through, but said Google would continue to pursue opportunities to diversify its portfolio “if we find the right combination of factors, including value.”
“Regulatory oversight is not new to us and we have successfully managed regulatory reviews for many large transactions in the past,” she added.
The company said it will pay a second-quarter dividend of 20 cents a share worth about $2.5 billion. The payment follows Google first dividend earlier this year, breaking with its previous policy of using only stock buybacks to pay investors.
Porat added that Google will invest another $5 billion in self-driving taxi service Waymo, which has recently expanded operations from San Francisco to Phoenix, Los Angeles and Austin.
Additional reporting by Nicholas Megaw
