Alphabet Q2 Beats Expectations, But Shares Dip

Alphabet has posted strong second quarter results that were better than expected, amid ongoing AI enthusiasm and stronger ad sales.

But despite the positive growth in both Q2 profits and revenues which beat Wall Street expectations, and a huge share buyback scheme, Alphabet’s Alphabet’s share price fell 4.6 percent to $175.13 on Wednesday afternoon, over investor fears that Google’s rising investments in AI infrastructure will squeeze margins, coupled with YouTube’s tough competition for ad dollars.

Also on Tuesday Alphabet’s $23 billion acquisition bid of Israeli-based cybersecurity startup Wiz was rejected, which if it had gone ahead, would have been Google’s largest-ever acquisition.

Q2 financials

Alphabet’s posted second quarter financial results revealed that the firm’s capital expenditure rose more than expected to $13.2 billion as it invests heavily in infrastructure needed to support generative AI services, as well as compete with Microsoft in the cloud space.

For the second quarter ending 30 June, Alphabet posted a net profit of $23.1 billion, up from $18.4 billion in the same year-ago quarter.

Revenues rose 14 percent to $84.7bn from $74.6bn a year earlier.

“Our strong performance this quarter highlights ongoing strength in Search and momentum in Cloud,” noted CEO Sundar Pichai. “We are innovating at every layer of the AI stack. Our longstanding infrastructure leadership and in-house research teams position us well as technology evolves and as we pursue the many opportunities ahead.”

Alphabet’s strong financials have been helped by heavy cost cutting, with both Pichai and outgoing CFO Ruth Porat being confronted in May by staff cost cuts, layoffs and “morale” issues following the company’s better-than-expected first-quarter earnings report.

Divisional performance

Digging into the unit performance, Google Search brought in $48.5bn (up from $42.6bn); YouTube ads rose 13 percent to $8.7bn (up from $7.7bn last year, and down from an increase of nearly 21 percent in Q1); Google Network delivered $7.4bn (down from $7.8bn), with Google advertising thus totalling $64.6bn during Q2, up from $58.1bn a year ealrier.

Meanwhile Google subscriptions, platforms and devices brought in $9.3bn (up from $8.1bn); the Google Cloud rose 28.8 percent to $10.3bn (from $8bn); and finally the Other Bets delivered $365m (up from $285m).

Google finished Q2 with 179,582 staff worldwide, and the firm also announced a $70bn stock buyback scheme for investors.