By 
Google’s advertising revenue grew nearly 12% in the quarter and beat Wall Street’s expectations.
Noah Berger/ AFP/ Getty Images
Alphabet
’s
second-quarter earnings clocked in below expectations, but the stock still gained.
Snap’s
disastrous report on Friday seemed to soften the blow for the Google parent.
The company reported second-quarter revenue of $69.69 billion, up 13% year over year. Net income was $16 billion, or $1.21 per share. Wall Street analysts forecast earnings per share of $1.27, according to FactSet, with revenue of $69.87 billion. Operating income of $19.4 billion was below expectations of $20.14 billion.
Alphabet and Google CEO Sundar Pichai said the firm’s performance was driven by search and cloud.
The company’s Google advertising revenue grew nearly 12% in the quarter to $56.29 billion, edging out expectations for $55.89 billion, according to FactSet. YouTube ad revenue grew 4.8% to $7.34 billion. Google Cloud revenue jumped 36% year over year to $6.28 billion.
“The investments we’ve made over the years in AI and computing are helping to make our services particularly valuable for consumers, and highly effective for businesses of all sizes,” Pichai said. “As we sharpen our focus, we’ll continue to invest responsibly in deep computer science for the long-term.”
Alphabet stock (ticker:
GOOGL
) has fallen 28% this year, including losses felt last week after
Snap
(SNAP) warned economic troubles were holding back the social-media app
Snap
chat’s advertising business. Investors worried Alphabet’s advertising business would experience similar problems.
But shares of Alphabet advanced 2.9% in late trading Tuesday. In other words, traders appeared to sell the rumor, then buy the news. The stock could still shift when the company’s quarterly conference call kicks off at 5 p.m. Eastern time.
On the call, commentary from Alphabet’s executives could offer investors a peek at how consumers and advertisers are responding to a weakening economy.
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Evercorse ISI analyst Mark Mahaney wrote in a Friday note that though he doesn’t believe Alphabet would be immune to a downturn, he sees it as the most recession-resistant advertising-focused stock. He noted that Alphabet wasn’t affected as much as other ad-dependent internet businesses by
Apple
’s
moves to curb advertising tracking on its platform without consent. And he said he thinks its cloud segment will be more resilient due to its software as a service, or SaaS, model and the cost efficiencies its offerings present enterprise customers.
Rosenblatt Securities analyst Barton Crockett was also upbeat about Alphabet stock, saying in a note Monday that investors should be willing to hold the shares through the volatility a recession could bring. Though he predicted at the time the actual results might be worse than Wall Street expected, he has a Buy rating and $205 fair-value estimate for the stock price.
“We continue to see long-term strengths in search, YouTube, and Google Cloud making this equity worth owning for the eventual end at some point of recession fears and headwinds,” he wrote. “Also, above-peer exposure to travel ads, which remain strong, could help relative trends near-term.”
Google’s parent company kicked off the earnings-reporting season for big tech. Shares of
Microsoft
(MSFT) were down 1.2% Tuesday after it also reported quarterly results.
Meta Platforms
(META), Apple (AAPL), and Amazon.com (AMZN) are reporting results in the days to follow.
Write to Connor Smith at connor.smith@barrons.com
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