During the annual Google I/O developers conference in Mountain View, California, on May 8, 2018, Sundar Pichai, the CEO of Google, delivered a compelling speech.
This week, Alphabet’s stock experienced a surge of 10% following the release of its second-quarter earnings report, defying the challenging advertising market.
The closing market price for Alphabet, Google’s parent company, stood at $132.58, marking the highest close price in over a year.
Amid concerns about a declining digital ad market and the potential impact of AI chatbots on search traffic, Google proved that it possesses multiple avenues for success in its second-quarter earnings report released on Tuesday.
The report revealed a 7% increase in revenue, from $69.7 billion in the same period last year to $74.6 billion in the current year.
Although the online advertising market has been challenging due to economic uncertainties and cost-cutting measures, Google managed to achieve a 3.3% growth in ad revenue compared to the previous year’s first quarter, which witnessed a decline. Additionally, this growth comes at a time when Snap’s disappointing forecast led to a 20% drop in its stock.
Despite facing competition, Google’s YouTube and Cloud units exhibited revenue growth.
“For the first time in a while, revenue growth outpaced expense growth,” noted Bernstein analysts in response to the earnings report.
Furthermore, the 10% increase in Alphabet’s stock price occurred even as Ruth Porat, the CFO responsible for company-wide cost-cutting efforts, announced her departure from the role after eight years to assume the newly created position of President and Chief Investment Officer.
The steady growth of search revenue, which constitutes the majority of Google’s ad business, provided reassurance to investors concerned about the potential migration of traditional search users to generative AI chatbots from OpenAI and Microsoft, the startup’s main investor, for their online queries.
“We believe this indicates a positive outlook for the overall online advertising industry,” remarked Citi analysts in a note on Google’s earnings. “Nevertheless, we emphasize the importance of investing in newer products and services rather than relying solely on a rising-tide environment.”
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