Alphabet, the parent company of Google, demonstrated in its second-quarter earnings report that it has various avenues for success despite challenges in the digital ad market and the potential impact of AI chatbots. Google’s revenue increased by 7% to $74.6 billion, surpassing analysts’ estimates, while profit also exceeded expectations. This positive performance led to a 6% rise in the company’s stock price during extended trading.
The online advertising market has faced difficulties due to economic concerns and cost-cutting measures by companies. Google’s ad revenue grew by 3.3% compared to the previous year, representing an improvement from the first quarter when ad revenue actually declined. In contrast, Snap’s second-quarter report was disappointing, with a weak forecast resulting in a 20% drop in its stock price.
Despite fears that traditional search users would shift to AI chatbots offered by OpenAI and Microsoft, Google’s search revenue experienced steady growth. Sundar Pichai, CEO of Alphabet, emphasized the company’s homegrown chatbot called Bard as a key investment focus. Pichai mentioned that the technology enables Google to think outside the box and expand search options for users.
Alphabet executives reassured investors about the company’s utilization of AI, emphasizing its widespread integration across various aspects of the business. However, Google has not yet announced a public release date for its Search Generative Experience (SGE), a feature that can synthesize search results from complex queries. Pichai believes AI will play a significant role in the future of search, providing a chance to break free from traditional limitations.
Apart from its ad business, Google’s cloud infrastructure presents another opportunity for growth. With competition from Amazon Web Services and Microsoft Azure, Google’s cloud business experienced a revenue increase of 28% in the second quarter. Pichai stated that over 70% of generative AI unicorns (startups valued at over $1 billion) are using Google Cloud’s services.
Despite challenges in the digital ad market, Google has demonstrated its ability to succeed through multiple avenues, such as its cloud business and continued innovation in AI.