Alphabet Inc. (NASDAQ: GOOG, GOOGL) unveiled its financial results for the second quarter ended June 30, 2024. The tech giant impressed investors and industry analysts by beating revenue expectations across all segments except YouTube. Interestingly, Alphabet’s global revenue in Q2 2024 grew an impressive 13.59% YoY and 5.22% QoQ to $84.74 billion worldwide. A whopping 76.3% of this came from Google’s advertising business.
What’s particularly notable is that despite increasing its operating expenditure by 8.6% YoY to $57.32 billion during the June quarter, Alphabet’s net income soared phenomenally. The company’s net profit jumped 28.6% YoY in Q2 2024 to $23.62 billion. Although it’s a slight 0.2% QoQ decline from the record $23.66 billion reported in Q1 2024, it still highlights Alphabet’s effective cost management.
Before we dig deeper, let’s see how much revenue Alphabet made from Google ads, Google Cloud and other services in Q2 2024.
Key Highlights: Alphabet Q2 2024 Revenue Breakdown
- Google ads revenue increased 11% YoY to $64.62 billion in Q2 2024. A whopping 75.1% of this came from Google Search & others.
- Revenue from Google Search & others surged an impressive 14% YoY to $48.51 billion, representing 57.2% of Alphabet’s total revenue in Q2 2024.
- Alphabet’s revenue from YouTube ads also grew 13% YoY in Q2 2024 to $8.66 billion.
- The Google Cloud revenue exceeded the $10 billion mark for the first time during the second quarter of 2024, reaching $10.35 billion. Revenue from this segment increased a significant 28.8% YoY. The share of Google Cloud revenue in Alphabet’s total revenue has been increasing with each passing quarter, standing at 12.2% in Q2 2024.
The success of Google Cloud represents a critical development for Alphabet. It demonstrates the company’s ability to diversify its revenue streams beyond advertising and positions it as a major player in the ever-growing cloud computing market.
Google advertising and Cloud segments are major drivers of Alphabet’s overall revenue growth and net profit in Q2 2024. However, it is operating profits from Google services (including Google advertising and Google subscriptions, platforms, and devices) and Google Cloud that truly stand out.
Alphabet generated $29.67 billion in operating profit from Google Services in the June quarter, an increase of 26.5% YoY. The operating profit from Google Cloud also surged an astonishing 196.7% YoY, from just $395 million in Q2 2023 to a whopping $1.17 billion in Q2 2024.
“We are innovating at every layer of the AI stack. Our longstanding infrastructure leadership and in-house research teams position us well as technology evolves and as we pursue the many opportunities ahead,” said Sundar Pichai, CEO of Alphabet.
Alphabet’s Big Bets on AI
Alphabet is betting big on Artificial Intelligence (AI). The company consolidated its AI research teams across Google Research and DeepMind, aiming to accelerate advancements in this field.
However, a key question remains: When will AI translate into concrete revenue for Alphabet?
The “Other Bets” segment of Alphabet, which houses moonshot projects like Waymo (self-driving cars), continues to lose money. Additionally, the company incurred a loss of approximately $2.29 billion in Alphabet-level activities, up 90.9% YoY. These costs primarily include AI-focused shared R&D activities, corporate initiatives such as philanthropic activities, corporate shared costs such as certain finance, human resources, legal costs, and certain fines and settlements.
Challenges and Setbacks
Despite the impressive revenue and profit numbers, Alphabet shares dipped 3.59% to $175.26 on July 24, 2024. The stock has risen 31.57% year-to-date (YTD).
Several factors contributed to Alphabet’s limited stock price movement. First of all, YouTube’s ad revenue growth fell short of expectations, casting a shadow on the company’s otherwise stellar performance during Q2.
Secondly, Alphabet’s failed acquisition of cybersecurity firm Wiz. The potential acquisition, valued at $23 billion, would have been Alphabet’s largest-ever, aimed at enhancing its cloud services to compete with Amazon and Microsoft.
One of the primary reasons behind Alphabet’s significant stock dip this year is the launch of the Gemini AI image generator tool and AI Overviews in Google Search without adequate preparation or testing. The Gemini AI image generator tool faced severe backlash from users for producing historically inaccurate images and questionable responses. Similarly, the AI Overviews feature in Search has been criticized for providing inaccurate and misleading information.
Despite all setbacks, Alphabet is committed to investing in AI projects. During the Q2 2024 earnings call, CEO Sundar Pichai highlighted the company’s strategic move into artificial intelligence, stating that Alphabet is “uniquely well-positioned for the AI opportunity ahead.”
After Alphabet’s Q2 2024 results, all eyes are now on its rivals – Microsoft, Amazon, and Apple – as investors and analysts eagerly await their financial reports.
