Alphabet, Google's parent company, exceeded second-quarter revenue and profit expectations, driven by increased digital advertising sales and strong demand for cloud computing services. Despite this success, the company indicated that capital expenses would remain high throughout the year.

Financial Highlights for Alphabet Q2 FY24

• Advertising Sales: Increased by 11% to $64.6 billion, largely due to events like the Paris Olympics and various elections.
• Net Income: Rose 28.6% to $23.6 billion, surpassing the average estimate of $22.9 billion.
• Total Revenue: Grew 14% to $84.74 billion, exceeding analysts' consensus estimate of $84.19 billion.
• YouTube Ad Sales: Rose 13% to $8.67 billion.
• Cloud Computing Revenue: Increased by 28.8% to $10.35 billion, beating the expected $10.16 billion.

Initially, Alphabet's shares rose by about 2% but later dipped by a similar percentage. The shares had already gained more than 30% this year, outperforming the Nasdaq Composite Index's 20% rise.

Capital Expenditures

• Reported at $13 billion for the June quarter.
• Expected to be at or above $12 billion for the rest of 2024.

AI and Technology

Strong adoption of generative artificial intelligence technology boosted the cloud business. Despite some embarrassing AI search results, Alphabet plans to expand AI use cases and potentially drive revenue through AI products.

Acquisitions and Regulatory Scrutiny

• Alphabet had been pursuing a $23 billion acquisition of cybersecurity firm Wiz, which was eventually called off.
• Talks to acquire HubSpot also fell through, which would have positioned Alphabet against competitors like Salesforce and Oracle.
• Google decided to retain third-party cookies in its Chrome browser, reversing its previous stance due to advertiser concerns.

Other Ventures

Revenue from "other bets," including Waymo, rose 28% to $365 million. A multi-year $5 billion investment in Waymo is planned, as rival Cruise recovers from a publicized accident.

Conclusion

Alphabet's strong performance in digital advertising and cloud computing underscores robust market demand, despite high capital expenditures and mixed investor reactions. The company continues to focus on AI advancements and strategic investments in other ventures.