Google plans to invest $5 billion in Waymo as its cloud business revenue exceeds $10 billion for the first time in Q2
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发表于 2024-7-24 10:59:31
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Technology giant Google's parent company Alphabet's Q2 revenue exceeded expectations, but capital expenditures also remained high.
After the stock market closed on July 23 local time, Google's parent company Alphabet released its Q2 2024 financial report as of June 30. According to the financial report, Alphabet achieved a revenue of $84.742 billion in the second quarter, a year-on-year increase of 14%, higher than analysts' expectations of $84.19 billion; Non GAAP net profit was $23.619 billion, a year-on-year increase of 28.59%; Diluted earnings per share were $1.89, unchanged from the previous quarter and higher than market expectations of $1.85.
Google CEO Sundar Pichai said, "Our outstanding performance this quarter highlights the continued strength of our search business and the momentum of our cloud business. We are innovating at every level of the AI stack. Our leadership position in long-term infrastructure and internal research team help the company drive technological evolution and pursue future opportunities
Ruth Porat, CFO (Chief Financial Officer) of Alphabet and Google, stated that the company's operating profit exceeded $1 billion for the first time this quarter, and the company will continue to strive to enhance its investment capabilities by continuously restructuring its cost base.
Google's Q2 performance highlights. Source: Google Financial Report
On the 23rd, Google's (Nasdaq: GOOG) stock price closed at $181.79 per share, with a total market value of $2.26 trillion. After the financial report was released, it rose more than 2% at one point, but then fell more than 1.5%. According to Wind data, Google's stock price has risen by over 30% since the beginning of this year.
Cloud business revenue exceeds $10 billion for the first time
From a business perspective, Google's two core businesses are advertising and cloud services. In the second quarter, Google's advertising business grew from $58.143 billion last year to $64.616 billion, exceeding market expectations of $64.5 billion. The revenue of Google Search, the largest business unit of the company, increased from $42.628 billion in the same period last year to $48.509 billion, a year-on-year increase of 13.80%; However, the advertising revenue of its video website YouTube increased from $7.665 billion in the same period last year to $8.663 billion, a year-on-year increase of 13%, lower than the market expectation of $8.93 billion.
In terms of cloud business, Google's cloud business revenue exceeded $10 billion for the first time, growing from $8.031 billion in the same period last year to $10.347 billion, a year-on-year increase of over 28%, higher than the market expectation of $10.1 billion, indicating that the company's strong investment in the AI field has produced objective returns. Pichai stated during the post earnings conference call that over 1.5 million developers are currently using his Gemini series of tools.
Google's non core business unit (Other Bets) generated revenue of $365 million in this quarter, up from $285 million in the same period last year. Borat announced on the financial report conference call that the company will invest 5 billion dollars for many years in Waymo, a subsidiary of the research and development of fully autonomous vehicle. According to Pichai, Waymo has paid 50000 trips per week.
In addition, after several waves of layoffs, the number of Google employees has decreased from 181798 in the same period last year to 179582.
Google's Q2 business performance. Source: Google Financial Report
Third quarter operating profit margin may be affected
It is worth noting that Google's capital expenditures in the second quarter reached $13 billion, and it is expected that quarterly capital expenditures for the remaining two quarters of this year will reach or exceed $12 billion. During the post earnings conference call, Google pointed out that although the operating profit margin reached 32% in this quarter, the operating profit margin in the third quarter may be affected due to factors such as increased investment in technology infrastructure and increased operating costs caused by hardware releases.
Regarding the AI Overview feature that the company partially shut down after launching on search engines due to a high number of incorrect answers, Pichai stated that the feedback on the product has been mostly positive, and the company "will definitely expand its scale this year," but at the same time, it will also "focus on quality. Google plans to start testing new ad presentation methods in its AI Overview later this year.
In addition, this meeting is also the last post earnings conference attended by the current CFO of the company, Borat, who is about to transition to the position of President and Chief Investment Officer. Anat Ashkenaz, who previously served as CFO of pharmaceutical giant Eli Lilly&Co., will become Google's new CFO.
Some analysts hope that Ashkenaz can provide more future performance guidance after taking office. However, 'only discussing the long-term trends of the business' was already a company tradition proposed by Google's founder during its initial public offering in 2004.
After the financial report was released, Brent Thill, an analyst at investment bank Jefferies, said that the company's fundamentals are still healthy: "However, it is too early to expect the benefits of AI because most companies are still in a trial and error mode, and substantial AI revenue is more likely to be achieved between 2025 and 2026
Scott Devitt, an analyst at US investment bank Wedbush, also remains optimistic about the strong growth momentum of Google search, believing that the AI overview feature can increase user engagement and may become a driving force for monetizing the search business in the future.
However, KeyBanc, a financial services company based in Portland, Oregon, pointed out in its analysis that Alphabet still faces uncertain factors such as the antitrust lawsuit from the US Department of Justice that will be heard in September, the upcoming US presidential election, and the seemingly endless massive capital expenditures related to AI.
In this financial report, Google did not mention any information regarding the distribution of dividends and stock repurchases. Previously, in its first quarter financial report released in April this year, Google announced its first-ever dividend payout on June 17, including $0.20 in cash per share for Class A, B, and C stocks registered as of June 10, 2024. In addition, the board of directors has authorized an additional repurchase of Class A and Class C stocks not exceeding $70 billion.
Prior to the release of its financial report, on July 23rd, cloud security startup Wiz announced that it would reject Google's acquisition proposal and proceed with its initial public offering as originally planned. Previously, Google announced that it would acquire Wiz for $23 billion, nearly double Wiz's valuation of $12 billion in its latest round of funding. Industry insiders have pointed out that Wiz's rejection of Google's acquisition is partly due to concerns about antitrust lawsuits and the pessimism of some investors.
Google also announced on the 22nd that it will end its plan to eliminate third-party cookies in the Chrome browser. After experiencing a series of setbacks, Google decided to retain this common information tracking technology called Cookies. Subsequently, the UK Information Commissioner's Office (ICO) issued a statement expressing disappointment with Google's change of plans and considering taking action.
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声明：该文观点仅代表作者本人，本文不代表CandyLake.com立场，且不构成建议，请谨慎对待。
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