Key points:

  • Alphabet’s financial results show strong demand for digital advertising and a recovery in corporate spending.
  • Alphabet increases capital expenditures amid the introduction of AI.
  • The stock is up more than 30% this year, outpacing gains in the Nasdaq Composite.

Alphabet on Tuesday reported growth in the second quarter, driven by both higher digital advertising revenue and strong demand for cloud services. Despite these positive results, the company expects capital expenditures to remain high through the end of the year.

Alphabet’s financial results show steady growth

Alphabet’s results confirmed strong demand for digital advertising driven by major events such as the Paris Olympics and elections in several countries, including the United States. At the same time, a recovery in corporate spending is boosting growth in Alphabet’s software business.

The introduction of advanced generative artificial intelligence technologies has become a key factor in the development of the company’s cloud business.

Advertising sales, Alphabet’s main source of revenue, rose 11% to $64.6 billion. The company effectively uses user data to target ads in its search product.

Investor reaction to the report was mixed, with the company’s shares initially rising about 2% before falling back to their original level. It’s worth noting that Alphabet shares are up more than 30% this year, outpacing the tech-heavy Nasdaq Composite’s 20% gain.

The company’s total revenue rose 14% to $84.74 billion, beating analysts’ estimates of $84.19 billion, according to LSEG. Advertising sales in the YouTube division increased by 13%, reaching $8.67 billion.

Revenue from cloud computing services, an important indicator of the state of corporate IT spending, rose 28.8% to $10.35 billion, beating analysts’ expectations of $10.16 billion.

Alphabet increases capital expenditures amid AI adoption

Alphabet announced $13 billion in capital expenditures in the June quarter. In her final conference call as Alphabet CFO, Ruth Porat told investors that quarterly capital expenditures through the end of 2024 are expected to be at or above $12 billion.

In the first quarter of 2024, the company’s capital expenditures soared 91% to $12 billion, raising concerns among investors.

Like other major technology companies, Alphabet is actively investing in the development and implementation of artificial intelligence solutions. Investors are pouring billions of dollars into this area, seeing huge potential for growth. Alphabet CEO Sundar Pichai told investors on Tuesday that AI technology will be rolled out in more countries. At the same time, Pichai did not specify the timing, but expressed confidence that in the near future, AI-based products will be able not only to optimize costs and increase the efficiency of companies, but also directly generate income.