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Growth in Google Cloud and Ads Pushes Alphabet to Perform Above Expectations in Q2 2023

Alphabet (NASDAQ: GOOGL), an American multinational conglomerate, saw its shares rise 7% in after-hours trading after announcing a better-than-expected revenue and profit for Q2 2023. During the three months, the company experienced a rebound in advertising dollars and benefited from the growing AI trend. While analysts expected Alphabet to report $1.34 earnings per share in Q2, the company pulled in $1.44 EPS. In addition, the quarterly revenue came in at $74.6 billion, exceeding expectations of $72.82 billion.

Alphabet was able to record profits in Q2 due to the consistent demand for Google Cloud services. As the AI market continues to boom, there is a steady request for Cloud services, spurring profits in the quarter. CEO Sundar Pichai said Alphabet experienced an “exciting momentum” on its products and the company between April and June. He added that the experience triggered the solid performance for the quarter. Pichai also stated that Alphabet’s “continued leadership in AI and our excellence in engineering and innovation are driving the next evolution of Search and improving all our services”.

In addition to the better-than-expected Q2 2023 revenue, Alphabet did better than predicted in its ad profits. Although advertisers have cut down on expenses over time, the recent ads retreat from X, formerly Twitter, has caused other platforms to see a rebound. Advertisers have resorted to the likes of Alphabet and Facebook parent company Meta Platforms as they bid farewell to the social networking service. As for Alphabet, the company recorded $7.67 billion in revenue in Q2 YouTube ads, surpassing the expectation of $7.43 billion. The company also squashed analysts’ prediction of $7.87 billion in Google Cloud revenue at $8.03 billion. Google’s ad revenue increased 3.3% from the previous year’s $56.29 billion to $58.14 billion. Furthermore, the traffic acquisition cost was $12.54 billion, above the expected $12.37 billion. Both the ads revenue and Google Cloud caused the Q2 revenue for Alphabet to jump 7% YoY from $69.7 billion to $74.6 billion.

Specifically, revenue in Google’s cloud unit, including infrastructure and \productivity apps, soared 28%. After losing %590 million last year, the division reported operating income of $395 million. Also in Q2, Alphabet noted that revenue from Google’s “search and other” popped slightly from last year to $42.63 billion.

Alphabet further stated that the Waymo self-driving car business and the Verily life sciences unit saw a 48% increase in revenue to $285 million in Q2. Notably, the division still accounted for an $813 million loss in the same period.

Except for losing over 1% in the last five days, Alphabet has been pulling in gains over the past year. The company’s stock has surged over 38% since the beginning of the year.

Growth in Google Cloud and Ads Pushes Alphabet to Perform Above Expectations in Q2 2023

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