Alphabet Inc. on Tuesday reported better-than-expected second-quarter revenue and profit, helped by rising digital advertising sales and solid demand for its cloud-computing services, but warned that capital spending will remain high for the year.
Alphabet’s results highlighted strong demand for digital advertising, driven by events such as the Paris Olympics and elections in several countries, including the United States, while a recovery in corporate spending is boosting the company’s software business.
The aggressive adoption of generative artificial intelligence technology drove the cloud business.
Advertising sales, Alphabet’s main source of revenue, rose 11% to $64.6 billion as the company uses customer data to sell more targeted ads in its search product.
Net income for the quarter ended June 30 rose 29 percent to $23.6 billion, beating the average estimate of $22.9 billion.
Investors reacted mixedly, with the stock initially rising about 2% before falling by a similar amount. The stock has risen more than 30% this year, outpacing a 20% gain in the tech-heavy Nasdaq Composite Index.
“It was another great quarter for Google, with better-than-expected results across the board,” said Ido Caspi, research analyst at Global X, who said ad sales and artificial intelligence offerings drove the results.
Total revenue rose 14% to $84.74 billion, compared with analyst consensus estimates of $84.19 billion, according to LSEG data. YouTube advertising revenue rose 13% to $8.67 billion.
Revenue from cloud computing services, widely seen as a gauge of the health of corporate technology spending, rose 28.8% to $10.35 billion. Analysts were expecting $10.16 billion.
Alphabet reported capital expenditures of $13 billion in the June quarter. Alphabet Chief Financial Officer Ruth Porat told investors on its last conference call that quarterly capital expenditures for the remainder of 2024 will be more than $12 billion.
The company surprised investors by increasing its capital spending 91% to $12 billion from January to March.
Alphabet, like its competitors, is rushing to roll out AI-related products as investors continue to pour billions of dollars into AI technology.
But the company’s AI searches produced a string of embarrassing results, including a suggestion to add glue to pizza to make the cheese stick better, and Google stopped using the technology in May to iron out the issues.
Alphabet CEO Sundar Pichai said during an investor call on Tuesday that the technology will be rolled out to more countries, adding: “You’ll start to see the use cases for this technology expand.”
Pichai didn’t give a timeline, but said AI products will not only help businesses through cost savings and increased efficiency, but could also lead to increased revenue in the near future.
Google was moving ahead with its biggest acquisition ever, buying cybersecurity company Wyz for about $23 billion, despite increased regulatory scrutiny, but Wyz told employees on Monday it would abandon the deal and instead pursue an initial public offering.
Google was also in talks to buy customer relationship management company HubSpot before pulling out earlier this month, a deal that would have positioned Alphabet as a rival to the likes of Salesforce and Oracle in that market.
Google said Monday it plans to keep third-party cookies in its Chrome browser’s backtracking feature, after promising for years to phase out the tiny packets of code used to track internet searches.
This is a major shift after advertisers expressed concern that the elimination of cookies would limit their ability to collect and analyze information to personalize ads, making them more reliant on Google’s user database.
Revenue from the Mountain View, California-based company’s so-called “other businesses,” which include pilot projects and its self-driving-car unit Waymo, rose 28% to $365 million. Mr. Porat said the company plans a multiyear investment of $5 billion in Waymo, as rival Cruise slowly charts its path back onto U.S. roads after a highly publicized crash in October.
