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Alphabet beats on top and bottom line, keeps the bull case in tact

AInvestTuesday, Jul 23, 2024 5:10 pm ET
1min read

Alphabet Inc. (GOOGL) delivered strong Q2 2024 earnings, beating both top and bottom line expectations. The company reported EPS of $1.89, surpassing the consensus estimate of $1.84, on revenues of $84.74 billion, which exceeded the forecasted $84.37 billion. This solid performance was driven by robust results in both its core advertising business and its burgeoning cloud segment.

Google’s advertising revenue came in at $64.62 billion, slightly above the estimate of $64.53 billion. However, YouTube ad revenue was a slight miss, totaling $8.66 billion against expectations of $8.95 billion. Despite this, the overall advertising segment remained strong, indicating sustained demand for Google's ad products.

Google Cloud was a bright spot, generating $10.35 billion in revenue, beating the anticipated $10.09 billion. Additionally, the cloud segment achieved an operating income of $1.17 billion, well above the estimated $982.2 million. This marks a significant milestone as Google Cloud continues to grow and improve its profitability, reinforcing the company's strategic emphasis on this segment.

The company’s total revenue excluding traffic acquisition costs (ex-TAC) was $71.36 billion, also ahead of the expected $70.7 billion. Google's Search and Other revenue totaled $48.51 billion, exceeding the forecast of $47.65 billion, underscoring the continued strength and dominance of its search engine.

Despite some volatility, Alphabet's shares initially rose by 1% following the earnings announcement but later settled down 3.5%. Investors seemed to react to the mixed results within the company's various segments, including the slight miss in YouTube ads and the increased capital expenditures of $13.19 billion, which were above the estimated $12.23 billion.

Operationally, Alphabet reported a total operating income of $27.43 billion, surpassing the consensus estimate of $26.37 billion. The Google Services segment contributed significantly with $29.67 billion in operating income, above the estimated $28.13 billion. However, the Other Bets segment continued to incur losses, with an operating loss of $1.13 billion compared to the expected $1.07 billion loss.

Sundar Pichai, CEO of Alphabet, highlighted the company’s ongoing strength in Search and the momentum in Cloud, emphasizing their innovations in AI and robust infrastructure. Ruth Porat, President and CFO, noted the 14% year-over-year revenue growth driven by Search and Cloud, and reiterated the company’s commitment to investing in high-growth opportunities while maintaining a focus on cost efficiency.

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