#AlphabetEarnings #AIInnovation #StrategicAcquisition
Alphabet Set to Report Q2 Earnings Results After the Bell
As Alphabet prepares to release its second-quarter earnings after the market closes on Tuesday, analysts are keenly observing whether the company can maintain consistent growth. The parent company of Google and YouTube is expected to post earnings of $1.84 per share and revenues nearing $84.18 billion, reflecting a 28% rise in earnings per share and a 13% increase in revenue compared to the same quarter last year.
Key Highlights
- Earnings Per Share: $1.84, as per LSEG
- Revenue: $84.18 billion, according to LSEG
- YouTube Revenue: $8.8 billion, to StreetAccount
- Google Revenue: $10.8 billion, to StreetAccount
- Traffic Costs (AC): $13.8 billion, according to StreetAccount
AI Announcements and Challenges
Alphabet reported several expansion initiatives during the quarter, including the launch of its autonomous vehicle division, Waymo, in San Francisco. The company also unveiled new AI tools at its developer conference, such as the large language model Gemini 1.5 Flash, capable of summarizing discussions, generating captions, and extracting data from documents and tables. However, some new products faced criticism, including AI Overview, which provided nonsensical or incorrect responses, raising concerns about the company's ability to safely deploy AI products.
Leadership Changes and Cost-Cutting Measures
Alphabet introduced a new Chief Financial Officer, Anat Ashkenazi, who will begin her role on July 31. The company also implemented cost-cutting measures, including layoffs affecting over 100 employees across various teams in Google’s cloud division and at least 200 workers from its 'Core' engineering teams.
Acquisition and Growth
Alphabet is reportedly exploring a potentially transformative acquisition of the cybersecurity company Wiz for $23 billion. This acquisition aims to enhance Google Cloud’s revenue. Analysts predict steady growth in crucial sectors such as cloud services and total revenue, following a quarter marked by leadership changes, AI announcements, and market expansions.
Analyst Expectations
- Baird: Expect Q2 results to be in line or even slightly better, with steady growth in Cloud services and positive management commentary regarding generative AI and progress with Gemini.
- Wolfe Research: Predict a 12.6% increase in Google search revenue compared to the previous year and expect both top and bottom lines to surpass expectations.
- Deutsche Bank: Raise price target to $195, maintaining a buy rating, citing overall strength in digital advertising and advancements in generative AI.
- Bank of America: Raise price target to $206, anticipating that a broader implementation of AI features will enhance search activity.
- TD Cowen: Raise target to $220, suggesting over 21% upside from Monday's close, due to expected strong spending growth in search and YouTube capturing a larger share of younger audiences.
Cautionary Notes
- Rosenblatt Securities: Predict that Alphabet’s total revenues will fall about 1% short of Wall Street’s consensus, primarily due to weaker performance in search, YouTube, and network advertisements.
- Bernstein: View the setup for the second quarter as "remarkably similar" to the first, though cautioning that margins should benefit from layoffs earlier this year and consolidation efforts, but rising infrastructure and talent costs associated with generative AI could impact operating expenses in the long term.
Original Article: https://www.cnbc.com/2024/07/23/alphabet-set-to-report-q2-earnings-results-after-the-bell.html
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