Search and Cloud are driving the business, said execs
Alphabet, Google’s parent company, on Tuesday posted second-quarter earnings that narrowly missed Wall Street estimates. The company reported $69.69 billion in revenue, 13% higher year over year, mostly in line with estimates. Net income was $16 billion, or $1.21 per share, lower than the $1.27 estimate predicted. Operating income was $19.4 billion, $1 billion short of Wall Street estimates.
“Our performance in Search in the second quarter was strong. We are also seeing momentum in Cloud,” said Alphabet CEO Sundar Pichai. Pichai thinks that Google is making a safe bet to invest in deep technology to ride out the current global uncertainty. Pichai addressed recent news about Google slowing hiring.
“Earlier this month, I announced that we’ll be slowing our hiring and sharpening our focus as a company. We are focused on hiring engineering, technical and other critical roles, and we are working to improve productivity and ensure that the great talent we do hire is aligned with our long-term priorities,” he said.
Alphabet reported advertising revenue totaling $56.29 billion for the quarter, higher than analyst estimates of $56.14 billion. Google Services revenue rose 10% to $62.8 billion. Google Search and other advertising revenues rose 14% in the quarter to $40.7. The better than anticipated ad revenue numbers pushed Alphabet stock higher in after hours trading following the news, with momentum carrying into Wednesday.
Google Cloud revenues were $6.3 billion, up 36%, said Alphabet CFO Ruth Porat. It’s the first time Google Cloud has surpassed $6 billion in quarterly revenue, Pichai noted. Porat said Alphabet saw significant growth in infrastructure and platform services during the quarter, where Google Cloud Platform revenue outperformed even Google Cloud’s. Operating losses for Google Cloud totaled $858 million.
Porat reminded investors that year-over-year comparisons wil be difficult because of history: A year ago, Alphabet was experiencing the benefits of a resurgent economy springing back to life following the 2020 pandemic shutdown. The landscape is very, very different in 2022.
“Going forward, the very strong revenue performance last year continues to create tough comps that will weigh on year-on-year growth rates of advertising revenues for the remainder of the year. In YouTube and Network, the pullbacks in spend by some advertisers in the second quarter reflects uncertainty about a number of factors that are challenging to disaggregate. Within other revenues in the third quarter, we expect an ongoing headwind from the fee changes and the slowdown in buyer spend that impacted results in the second quarter,” she added.
Asked by analysts after her preamble whether Google would prioritize break-even for Google Cloud, Porat told investors that Google Cloud was a “long-term opportunity.” Enterprise customers are still very early in their cloud journey, she said. The company is investing to support Google Cloud’s long-term growth, she added.
Costs associated with data centers and other operations were $20.1 billion, up 24%. Porat said that the increase in R&D expenses was driven primarily by headcount growth.
