Alphabet’s Generative AI Investments Pay Off: Experts on Robust Q2

Alphabet’s earnings came in better than expected, as operating profit topped $1 billion for the first time. Let’s look at the detailed breakdown of the results with the experts.

Alphabet’s Q2: Details

Google’s parent company Alphabet (GOOG) reported earnings per share of $1.89 against a revenue of $84 billion. The expectation stood at $1.85 versus revenue of $84.3 billion. The earnings per share increased by 31% while the revenue jumped by 14%.

The company’s advertising revenue rose by 11% to $64.6 billion vs. $58.1 billion last year. The income for the quarter ending June 30th witnessed an increase of 28.6% to an impressive $23.6 billion. The YouTube division also added $8.67 billion to its revenue due to ad sales, which was lower than the estimated $8.95 billion.?

One of the most important figures is the revenue through cloud computing services, which came in at $10.35 billion. This represents an increase of 28.8%. Google Cloud provided a profit of $1.17 billion, more than the $982 million expected by the analysts.

Alphabet’s Plans for Generative AI

Alphabet has spent around $2.2 billion on AI, especially through DeepMind and Google Research organizations. It is up from $1.1 billion in Q2 2023. For instance, the company has recently added generative AI features to its Gmail services.

Alphabet is expanding its presence in the generative AI field by introducing NotebookLM, an AI-powered note-taking app, and YouTube Music Gemini Extension.

As the AI market is expected to reach $356 billion by 2030, such efforts stand to profit the company in the long run.?

Alphabet and Self-Driving Cars

Recently, the CFO of Alphabet, Ruth Porat, shared the plan to invest $5 billion in a self-driving car unit Waymo. The company’s Other Bets unit, which includes Waymo, has registered $365 million in quarterly revenues, which came in at $285 million last year.

Life in San Francisco today: in a Waymo behind another Waymo. Welcome to the future! Our city is leading the AI revolution, with innovation driving us forward every day. ???? Embrace the SF AI boom loop! #FutureForward #SFAI pic.twitter.com/iJceFcO9tT

— Marc Benioff (@Benioff) July 17, 2024

However, the losses also increased to $1.13 billion from $813 million in 2023. The Other Bets sector, which contains various ventures, is under strict scrutiny as it has piled up operating losses amounting to $37.3 billion since 2014 versus a revenue of $7.3 billion.?

Can Alphabet Share Price Touch $300?

Alphabet’s share price has increased 43.7% in one year. Meanwhile, its competitors, such as Microsoft (MSFT) and Amazon (AMZN), are up 18% and 22% YTD, respectively.

According to some estimates, the high-end side of the stock is expected to hit $8 per share in 2025 and $10 per share by 2025. Another projection puts Alphabet’s share price at $650, up 375% from current levels, based on the increase in revenue due to AI integration and increased digital ad spending.

According to Coincodex, the stock is expected to touch a price of $205 by Q1 2025.?

All of these long-term forecasts always include some assumptions. However, it is important to note that these are significantly bullish.

Earlier this year, Google’s Gemini experienced a backlash due to its inability to generate accurate images despite clear prompts. Regardless, Google continues to invest in AI services and projects to expand its AI capabilities against its rivals, such as Microsoft and Meta.