Cloud Computing, Search Ads Boost Alphabet's Revenue

Google parent Alphabet Inc. reported second-quarter revenue that beat analysts’ expectations, boosted by demand for cloud-computing services and advertising on its search engine.

Bloomberg reports sales, excluding partner payouts, were $71.36 billion in the second quarter, the company said Tuesday in a statement. Analysts had projected $70.7 billion, according to data compiled by Bloomberg. Net income was $1.89 per share, compared with Wall Street’s $1.84 per-share estimate.

Google once had a head start in the AI race because it developed much of the technology underpinning popular chatbots. Now, the company aims to prove that it can withstand competition from the likes of OpenAI and Microsoft Corp. as they try to draw people away from traditional web search, pushing chatbots that can answer users’ questions in a conversational fashion. Google has rushed to weave artificial intelligence into all of its widely-used products, including Gmail, Google Docs and search, occasionally with mixed results.

It’s also providing cloud-computing services to fast-growing startups, fueling consistent profitability for that business after years of losing money.

“We’ve certainly seen the benefit of our strength in AI, AI infrastructure, as well as generative AI solutions for cloud customers,” Alphabet Chief Investment Officer Ruth Porat said on a call with media. “There is no question customers are turning to us as they are building out their capabilities.”

Google Cloud brought in profit of $1.17 billion, beating analysts’ estimates for operating income of $982 million. Google still trails behind Amazon.com Inc. and Microsoft in the cloud computing market, but in the past year, the unit has attracted business from artificial intelligence startups. Investors are also eyeing Google Cloud as the unit with the most potential to grow Alphabet overall, especially as its search business matures.

Quarterly search advertising revenue was $48.5 billion, compared with the average analyst projection for $47.6 billion.

YouTube reported $8.66 billion in revenue, compared with analysts’ average estimate of $8.95 billion. Of Alphabet’s various businesses, YouTube has been the most vulnerable to swings in the digital-ad market.