The company’s stock rose in after-hours trading.
(Photo: dpa)
san francisco Google’s quarterly results on Tuesday opened a critical week of earnings reports from tech companies. Initial reactions from investors have been positive that the downtrend in tech stocks may be over.
Alphabet, Google’s parent company, surprised investors with its second-quarter results. Business lost some of its momentum, but not as much as was generally feared. In particular, the eagerly awaited online advertising business was stable and better than expected with growth of 11.6 percent year-on-year to $56.3 billion.
“In the second quarter, search and cloud drove our business,” said Alphabet CEO Sundar Pichai. After a quarterly report from the heavily advertising-dependent network Snap, which was received as disastrous, analysts had feared that Google was about to do the same. So far, however, only YouTube has been comparatively weak, with TikTok in particular being massively and successfully attacked by the Google subsidiary with its short videos in the advertising market.
In the analyst call, Pichai and CFO Ruth Porat pointed out that YouTube had lost customers and budget cuts, but that the extremely good quarters during the pandemic had simply created high hurdles for comparisons. The current, rather normal, increase in the core area of advertising of almost twelve percent must be measured against the growth of 69 percent in the same period last year. This will be repeated in the coming quarters.
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“Our investments in artificial intelligence are now paying off,” Pichai continued, especially in the areas of search, maps, translation and e-commerce. According to Pichai, Google sees “a billion purchases on its pages” every day, and the shopping area is constantly growing. Youtube has just started a cooperation with Shopify to simplify the setup of live shopping channels. Google sees such direct response channels as a great opportunity.
Google Cloud broke the $6 billion mark in quarterly revenue for the first time. Sophie Lund-Yates, an analyst at Hargreaves Lansdown, comments: “Even if Google’s youngest division is still making losses, there should be enough pressure now to work its way out of this for the foreseeable future.” Operationally, the cloud business made around $858 million in the quarter Losses.
Earnings weighed down by risky transactions
On the currency side, the initial tailwind for earnings has turned into a headwind of 3.7 percent most recently due to the weakness of the dollar. In the third quarter it should be even more, according to the forecast. Alphabet recently counted 21 percent more full-time employees than in the previous year. But in view of the current situation, the rate of hiring should now be throttled and “efficiency increased”, said Pichai in the analyst interview. A trend that can be observed at many tech companies.
Alphabet’s revenue increased 13 percent to $69.7 billion. As usual, the so-called “other bets”, including the division with the autonomous vehicles “Waymo”, had a negative impact on the result.
In the risky future divisions, sales rose marginally by a million dollars, the operating loss totaled 1.7 billion dollars. At $16 billion, the company’s net income fell short of last year’s $18 billion and analysts’ expectations.
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