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Alphabet reports better-than-expected quarterly results driven by growth in cloud

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Sundar Pichai, CEO, Alphabet Inc., during the Google I/O developers conference in Mountain View, California, May 10, 2023.
David Paul Morris | Bloomberg | Getty Images

Alphabet will report second-quarter earnings after the close of regular trading on Tuesday.

Here’s what Wall Street is expecting:

  • Earnings: $1.34 per share, adjusted, according to Refinitiv.
  • Revenue: $72.82 billion, according to Refinitiv.
  • Google Cloud: $7.87 billion, according to StreetAccount.
  • YouTube ads: $7.43 billion, according to Street Account.
  • Traffic acquisition costs: $12.37 billion, according to StreetAccount.

For the fourth straight quarter, Google’s parent company is expected to report revenue year-over-year growth in the single digits as it reckons with a pullback in digital ad spending that reflects concerns about the economy. Analysts don’t expect growth to hit double digits again until the fourth quarter.

The cost cuts that highlighted the start of the year across much of the tech sector and included mass layoffs at Google continued into the second quarter though in less dramatic fashion.

The company eliminated some jobs at navigation unit Waze as it continues to merge its mapping products. Since December, Google has been consolidating Waze with its own tools. The company is also eliminating some projects, including a Generation Z social chatbot, as CNBC recently reported.

The big theme for the second quarter was artificial intelligence. At Google I/O, the annual developer conference, Google said it’s bringing generative AI features to search with a new product called Search Generative Experience (SGE), which the company says will be able to synthesize search results from complex queries. Google has yet to say when the service will be widely available to the public.  

During the quarter, the Big Tech giant announced it would merge Google Brain, part of the research division, and DeepMind as it races to compete in AI. The company also said it will partner with Character AI, a startup founded by former Google employees that focuses on building advanced, customizable AI chatbots.  

Google has been rolling out updates to its ChatGPT competitor Bard, which it launched publicly in March. It expanded to over 40 languages in more countries, and will include features like audio responses. 

While the core ad market continues to struggle, cloud remains a catalyst for expansion. Google Cloud, which competes with infrastructure offerings from Amazon and Microsoft, is expected to report growth of 25%. The unit recorded its first operating profit in the first quarter. Analysts project Microsoft will report a similar growth rate for Azure in its earnings release, which is also set for after the close on Tuesday.

Across the company, leadership is still trying to get employees to return to the office on a more regular basis. Google has cracked down on attendance, even asking staffers who had been approved for remote work to reconsider — a move that caused some consternation among employees. Workers also complained about CEO Sundar Pichai’s pay, which filings show swelled to $226 million last year, primarily from stock awards.  

Alphabet shares are up 38% this year, topping the S&P 500’s 19% advance.

Executives will discuss the quarterly results with analysts on a conference call starting at 5 p.m. ET.

WATCH: Google testing a new AI tool that writes news articles

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