Why we're sticking with Alphabet despite an imperfect quarter and more AI spending
Alphabet shares fell Wednesday evening after the Google parent reported good, but not great second-quarter results. While artificial intelligence adoption is boosting top-line growth, it's also driving higher levels of...
S&P 500 (SPY) Temmuz'da (DÜŞÜK) 730 Doları vuracak mı?
An important development from the financial markets: Alphabet shares fell Wednesday evening after the Google parent reported good, but not great second-quarter results. While artificial intelligence adoption is boosting top-line growth, it's also driving higher levels of capital spending. And that doesn't seem to be changing any time soon.
Revenue in the second quarter increased 24% year over year to $119. 8 billion, well ahead of the $116. 9 billion expected, according to LSEG data.
Economic Details
Earnings per share came in at $9. That's way above the LSEG-compiled consensus estimate of $2. However, the result included a massive ($99 billion) contribution from equity investment gains, driven by its SpaceX and Anthropic stakes.
Excluding that gain, Alphabet's operational earnings appear to be closer to $2. That's why the Street is likely considering this a miss on the bottom line. However, operating income came in better than expected at $40.
77 billion, with operating margins expanding 1. 6 percentage points from a year ago. Shares of Alphabet are down over 3% in the after-hours session.
Analyst Views
That continues a downward trend that began in mid-May, after the stock closed at a record high of $402. It had ascended to those heights after strong first-quarter results in late April offered proof that its AI investments were paying off. But that post-earnings advance in the spring has now evaporated.
In the intervening months, the market grew more skeptical of spiraling AI spending from the hyperscalers — and Alphabet's recent bond and equity offerings contributed to that attitude shift. Plus, a handful of AI researchers leaving for rivals in June and delays to its new flagship model added to the questions surrounding Alphabet entering the second-quarter print. GOOGL YTD mountain Alphabet's year-to-date stock performance.
Bottom line Alphabet delivered a good quarter on the AI demand side of the equation. However, the full report came with enough shortfalls that the stock's slide in extended trading isn't surprising. The market isn't in a forgiving mood.
Financial markets are tracking the development closely as investors assess the likely impact.
