Google shares jumped 10% last week on cloud computing, advertising, and hope for artificial intelligence
Alphabet’s shares jumped 10% last week after the company presented its second-quarter report, which showed growth despite the difficult conditions in the advertising market.
The share price of Google’s parent company reached $132.58 by market close on Friday, the highest in more than a year.
During the year, Google faced a significant number of challenges in its core search business due to the weakness of the digital advertising market and the long-term prospect of losing traffic to AI-based chatbots.
However, in its second-quarter report presented on Wednesday, the company showed that it has many ways to succeed despite these very real challenges. In particular, the profit increased by 7% to $74.6 billion from $69.7 billion in the same period last year.
Online advertising, which has been a challenging market over the past year, remains slow due to economic concerns and corporate cost cutting. Google’s advertising revenue grew by only 3.3% year-on-year, but this is an improvement over the first quarter, when advertising revenue fell. And this happened after Snap published a disappointing forecast in its second-quarter report, which caused the stock to fall by almost 20%.
Revenue from YouTube and Google Cloud also showed growth despite competition.
“Revenue growth outpaced expense growth for the first time in a long time,” Bernstein analysts wrote in a commentary after the earnings report.
The rise in Google’s stock also came despite the fact that Alphabet’s chief financial officer, Ruth Porat, who has been leading the company’s cost-cutting efforts, announced that she is leaving the position after eight years to take on the newly created role of president and chief investment officer.
Search revenue, which makes up the majority of Google’s advertising business, also showed steady growth during the quarter. This came as a relief to investors, some of whom were concerned that traditional users would switch to using generative AI chatbots from OpenAI and Microsoft, the startup’s main investor, for their online queries.
“We believe this bodes well for the broader online advertising environment,” – Citi analysts wrote in their commentary on Google’s earnings. “However, we do not believe that this is a promising environment, instead we favor those platforms that have invested in new products and services.”
