Alphabet (Google) delighted the market on Tuesday with 74.6 billion dollars in sales and 18.4 billion in net profit in the second quarter, results better than expected by analysts in an economic environment that is not conducive to advertising spending. Its stock rose more than 6% in electronic trading after the closing of the New York Stock Exchange.
Sales of advertising space on YouTube and its revenues in the cloud (remote computing) also emerged above market forecasts. YouTube collected 7.7 billion dollars, and Google Cloud, 8 billion dollars, an increase of 27% over one year for this subsidiary. With an operating profit close to 400 million dollars, the activity confirms the test after having made its first profit in the first quarter.
Despite these encouraging results in the eyes of investors, the world’s number one in digital advertising is facing many headwinds, from inflation to high interest rates and competition from TikTok. These are all factors that weigh on advertisers’ spending on the search engine and on YouTube. “Since YouTube recorded its first year-on-year decline in ad revenue in Q3 2022, the platform has struggled to rebound, despite tactics to improve Shorts’ monetization,” commented Insider intelligence analyst Evelyn Mitchell-Wolf. , evoking the format of short and entertaining videos copied on Tiktok.
“Even online search, Google’s core business, is in bad shape as additional advertiser spending goes mostly to e-commerce platforms like Amazon…Google can’t rest on its laurels. “, she insisted.
Above all, analysts have their eyes on the frantic race for artificial intelligence (AI), even if it will take several quarters before the new products being rolled out have an impact on the results of large companies. After the “solid performance of tech companies in the first half (…), Wall Street wants to know what this AI revolution means for the sector in the months and years to come,” said Dan Ives of Wedbush.
The release in November of the ChatGPT interface – designed by the Californian startup OpenAI, mainly financed by Microsoft – launched a lightning-fast race for generative AI, between exuberant enthusiasm and apocalyptic worries. Google and Microsoft have thus added to their office automation and communication software, for professionals or the general public, tools capable of producing text and/or images on simple request in everyday language.
Google’s answer to ChatGPT, Bard, already available in English in 180 countries around the world, will soon be able to converse in 40 languages. It must become multimedia, that is to say be able to integrate images into the questions of Internet users and into their answers. The stakes are such that Sergey Brin, co-founder of Google who handed over several years ago, is back in the office several times a week, according to the Wall Street Journal. According to Dan Ives, AI will represent an 800 billion dollar market and spending on this technology could monopolize between 8 and 10% of companies’ IT budgets in 2024, compared to 1% this year.
