Alphabet revenue beats forecasts on robust digital ad performance

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Google parent Alphabet’s revenues surpassed analysts’ forecasts in the second quarter, sending shares up in after-hours trading after showing signs of resilience in its digital advertising business.

The search and advertising giant said on Tuesday that revenues in the quarter ending June 30 climbed 7 per cent to $74.6bn, ahead of estimates for $72.8bn, according to Refinitiv.

Revenue from Google ads, YouTube ads and Google Cloud all beat forecasts. Alphabet’s net profit of $18.4bn was well ahead of the $16.9bn expected by Wall Street.

“There’s exciting momentum across our products and the company, which drove strong results this quarter,” said chief executive Sundar Pichai.

Pichai said that the company’s “continued leadership in AI and our excellence in engineering and innovation are driving the next evolution of Search, and improving all our services”.

Operating margins rose 1 percentage point to 29 per cent, despite concerns that the cost of building infrastructure for artificial intelligence could play into the quarter. Google is widely perceived to be playing catch-up to rivals, led by Microsoft, in novel uses of “generative AI”, including intelligent chat bots.

Shares in Alphabet jumped more than 6 per cent in post-market trading.

The company’s stock has already climbed 37 per cent this year, giving it a market valuation of more than $1.55tn. However, it remains nearly a fifth below all-time highs in November 2021, before growth for digital ads slowed across much of the sector.

Google ad revenues in the quarter rose 3.3 per cent to $58.1bn, versus forecasts of $57.5bn. YouTube ad revenue rose 4.4 per cent to $7.7bn, against forecasts for $7.4bn. And Google Cloud revenue jumped 27 per cent $8.0bn, ahead of forecasts of $7.8bn.

The Google Cloud division, which turned an operating profit in the March quarter, posted another profit of $395mn. A year ago it recorded a $590mn loss.

Alphabet also announced Tuesday that finance chief Ruth Porat would be appointed chief investment officer, a new role at the company, and will serve as CFO until a successor is found.