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Alphabet Shares Get a Boost on Ad Revenue Beat

Ticker Symbol: GOOG

Alphabet shares are up 2% in the post-market trading session after the company reported second-quarter advertising revenue which beat the consensus estimate from Wall Street, despite a miss on total revenue and earnings. Shares may be trading up primarily because the company avoided some of the worst-case scenarios investors may have feared after Snap reported a sharp slowdown in ad revenue last week.

The company reported Google Ad revenue of $56.29 billion, which was up 12% from the previous year, ahead of the expected $55.89 billion. The beat on ad revenue, which is still Alphabet’s primary revenue generator, may boost investor sentiment that Google can withstand some of the industry-wide slowdowns in advertisement better than competitors. YouTube’s ad growth was relatively moribund, but better than the drastic slowdown from the first quarter.

Google Cloud’s revenue missed estimates of $6.33 billion, coming in at $6.28 billion. Other Bets, the segment which comprises the company’s “moon shot” operations such as Waymo, Verily, and start-up investments, came in at $193 million and well short of the $300.5 million expected by analysts. Google Services revenue grew to $62.8 billion, narrowly missing the forecasted $62.9 billion. “Other revenue” at the Google unit also missed estimates of $7.1 billion, with the company reporting $6.55 billion.

In aggregate, the company reported second-quarter total revenue of $69.69 billion, shy of the $70 billion that investors were expecting. Growth has slowed considerably at the technology giant, with the top-line climbing by 13% year over year, down from the 62% growth it experienced in the second quarter of 2021. Alphabet also reported adjusted earnings per share of $1.21. The figure was lower than the $1.32 per share that was estimated by analysts. The second quarter operating margin of 28% was likewise a touch lower than the 28.4% expected.

Google’s Cloud business reported operating losses of $858 million, up from $591 million in 2021, and wider than the $628 million loss analysts were projecting. The company said it continues to invest heavily into this division to catch up with market leaders Amazon Web Services and Microsoft’s Azure. In addition to the losses in the cloud business, the company also took a write-off for its Russia business during the quarter and dealt with currency headwinds that caused margin compression.

Furthermore, Other Bets, the amalgamation of Alphabet’s start-up firms, reported an operating loss of $1.69 billion, once again missing estimates for losses of $1.2 billion. The segment has been a perpetual cash burn and Alphabet has reported consistent large losses across the portfolio of companies that comprise the division. Given investors added attention to profits recently, Chief Financial Officer Ruth Porat said that hiring would be slowed at the division and across the company to contain costs. Alphabet shares are down 27% for the year.

This content is provided for general information purposes only and is not to be taken as investment advice nor as a recommendation for any security, investment strategy or investment account.