Google search helps Alphabet beat estimates in Q2; Shares jump 6% post-market

Google’s flagship search business has weathered an advertising slowdown that affected social media companies, such as Meta Platforms Inc. and Snap Inc., more severely in recent quarters. The company’s search product also continues to dominate despite new competitive threats from Microsoft Corp. and OpenAI, which have joined up to provide an alternative called ChatGPT that answers users’ questions with conversational responses powered by generative AI. Google’s chatbot, Bard, isn’t yet as widely used.

“Modest growth from YouTube and search put Google in a strong position as it prepares to defend its dominance in the digital advertising market,” Evelyn Mitchell-Wolf, a senior analyst at Insider Intelligence, wrote in a note. “Google has the high ground. All it has to do now is keep increasing revenues while executing its carefully laid plans to lead advertisers and consumers into the AI-powered future without any catastrophes.”

Google’s cloud unit brought in a profit of $395 million on sales of $8.03 billion, beating analysts’ estimates for a profit of $163 million. Though the division trails the size of cloud businesses at Amazon.com Inc. and Microsoft, the effort is viewed as one of Google’s best bets for growth as its search business matures and the demand for computing infrastructure increases with the industry’s investment in AI.

YouTube reported ad sales of $7.67 billion, compared with Wall Street’s estimate of $7.4 billion. The division has been the most susceptible to marketers’ pullback in spending over the last year, so its performance ahead of estimates could be a good sign for competitors, too.

Alphabet’s Other Bets — a collection of nascent companies including the self-driving car venture Waymo and life sciences unit Verily — brought in $285 million in second-quarter revenue while narrowing its losses to $813 million.