By Greg Bensinger, Akash Sriram and Max A. Cherney
SAN FRANCISCO (Reuters) -Alphabet's second-quarter profit exceeded Wall Street expectations on Tuesday and the Google parent announced that its long-time CFO, Ruth Porat, would assume a new role while the company sought a new finance chief.
Alphabet's results were helped by steady demand for its cloud services and a rebound in advertising. The shares jumped 8% in after-hours trading. Shares of rival Microsoft were down slightly after it also reported results on Tuesday, while shares of Meta Platforms, a company also highly dependent on ad sales, rose as much as 2%.
"Not only did Google deliver fantastic earnings per share, exceeding expectations at a time when investors were questioning its ability to keep up with other tech giants amid the AI frenzy, it also did so by a considerable margin," said Thomas Monteiro, senior analyst at Investing.com. "This strongly indicates that a new growth phase for the giant is likely under way."
He added, "Google has finally consolidated itself as a leading force in the highly-disputed cloud sector and now has room to focus its expansion in the AI field."
Porat, hired in 2015, is one of Silicon Valley's most prominent female executives and oversaw tremendous growth at Alphabet. She will become chief investment officer and president starting Sept. 1.
Porat was hired from Morgan Stanley, where she was finance chief. In her new role, she will oversee the company’s so-called Other Bets portfolio, the unit for more risky hardware and services ventures, as well as help manage the company’s global investments.
Advertisers, who make up a big share of Alphabet's revenue, have pulled back on spending precious dollars on untested platforms, helping the Google parent as well as Facebook owner Meta Platforms.
Silicon Valley has been buzzing over generative artificial intelligence software that can give long-winded responses to user queries and is predicted to be the next leap forward for Big Tech. Alphabet rolled out AI products at its annual I/O developer conference in May and it revamped its search engine to include generative AI.
The company plans to integrate generative AI into other products such as Gmail and Google Photos. Generative AI tech can create text, images and video that resemble what people produce.
Still, the results released on Tuesday show that ad sales are still king. Investors punished social media company Snap on Tuesday for its disappointing ad sales in the quarter. Revenue at Google Cloud, which is among the biggest cloud service providers, rose 28% to $8.1 billion, besting expectations of $7.75 billion, and maintaining roughly the same rate of growth as the first quarter. Microsoft's Azure revenue rose 26%, ahead of the growth estimate from Visible Alpha.
Ad sales for Google's YouTube video service unit rose 4.4% to $7.67 billion. Alphabet reported net profit of $1.44 per share for the April-June period, compared with estimates of $1.34 per share.
Revenue for the quarter stood at $74.6 billion, compared with estimates of $72.82 billion, according to Refinitiv data.
(Reporting by Greg Bensinger and Max A. Cherney in San Francisco and Akash Sriram in BengaluruEditing by Arun Koyyur, Sayantani Ghosh and Matthew Lewis)
