Alphabet beats profit estimates, but YouTube ad revenue falls short of expectations

Google parent Alphabet reported second-quarter results after the close of trading on Tuesday, reporting sales and profits in line with analysts' expectations but missing forecasts for YouTube advertising revenue.

Alphabet shares fell about 2% in after-hours trading.

Here's how the company's performance compares with analyst forecasts surveyed by LSEG:

Earnings: $1.89 per share (expected $1.84)

Revenue: $84.74 billion (prediction: $84.19 billion)

Other numbers closely watched by Wall Street included:

YouTube ad revenue: $8.66 billion vs. $8.93 billion, according to StreetAccount. Google Cloud revenue: $10.35 billion vs. $10.20 billion, according to StreetAccount. Traffic acquisition costs (TAC): $13.39 billion vs. $13.54 billion, according to StreetAccount.

Alphabet's revenue grew 14% year over year, driven by search and cloud, and its quarterly revenue exceeded $10 billion for the first time, while its operating profit surpassed $1 billion.

The company reported that ad revenue rose to $64.62 billion from $58.14 billion last year, signaling that Google's advertising business continues to grow, albeit at a slower pace than in the first quarter, after rising inflation and interest rates led to tightening marketing budgets in 2022 and 2023.

YouTube's advertising revenue fell short of expectations but rose to $8.66 billion from $7.66 billion in the same period last year. YouTube is the world's largest video platform but faces increasing competition from social video sites such as TikTok.

Net income increased to $23.6 billion, or $1.89 per share, from $18.4 billion, or $1.44 per share, in the same period last year.

The company's “other businesses” division, which includes self-driving car developer Waymo, reported revenue of $365 million, up from $285 million a year ago. Financial Chief Ruth Porat announced on the company's earnings call that Alphabet is making a new multiyear investment of $5 billion in Waymo.

In the second quarter, Alphabet rolled out several expansion updates, including Waymo launching to all users in San Francisco, its second citywide rollout after debuting in the Phoenix metropolitan area in 2020.

Waymo currently provides 50,000 paid public rides per week, primarily in San Francisco and Phoenix, Chief Executive Officer Sundar Pichai said on the company's earnings call.

“This quarter's strong performance highlights the continued strength in search and momentum in cloud,” Pichai said in the earnings call. “We are innovating at every layer of the AI ​​stack. Our long-standing infrastructure leadership and in-house research team position us well as technology evolves and we pursue the many opportunities ahead.”

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