Google parent Alphabet (GOOG, GOOGL) will report its second quarter earnings after the bell on Wednesday as the company continues to ride the artificial intelligence wave.
Alphabet is one of the largest and most advanced companies in the space, thanks to its vast network of data centers and Gemini AI models. According to CEO Sundar Pichai, the company’s AI Overview is already drawing 1.5 billion users, and its AI services are seeing 2x longer queries than its traditional search product.
According to BofA Global Research analyst Justin Post, potential positives for the quarter include increasing advertising spending, AI helping to power revenue, and strong cloud performance.
“We remain constructive on Google’s ability to drive AI usage despite cautious sentiment, and see Gemini improvements, AI Mode integration in search and Workspace price increases as key YTD positives,” Post wrote in a note to investors.
For the quarter, Google is expected to post adjusted earnings per share of $2.17 on revenue excluding traffic acquisition costs (TAC) of $79.6 billion, an 11.6% jump versus the same period last year, when the company posted revenue of $71.3 billion, according to analyst consensus data from Bloomberg.
Advertising revenue is expected to come in at $69.6 billion, up 7.7% year over year, with Search accounting for $52.7 billion. YouTube ad revenue is anticipated to top out at $9.5 billion.
Google Cloud Platform revenue is set to hit $13.1 billion, up 26%. Cloud operating income should hit $2.2 billion, climbing 91% year over year. That, however, is far lower than the 196% improvement the company reported in the same period last year.
Google, like its other Big Tech peers, is also pushing for employee buyouts as the industry continues to reduce headcount more broadly. Amazon (AMZN), Meta (META), and Microsoft (MSFT) have or are planning to cut jobs amid massive capital expenditure on their AI build-outs.
This year, Google is expected to drop $75 billion to expand its AI capabilities, including on massive data centers running on both its own home-grown chips and Nvidia’s processors.
Despite that, Google senior vice president and CFO Anat Ashkenazi told analysts during the company’s Q1 earnings call that it continues to face AI capacity issues as demand outstrips available computing power. Expect investors to be looking at whether that changes in Q2.
Google is also facing potentially devastating consequences from a judge’s decision that held it liable for antitrust violations in search. Judge Amit Mehta of the US District Court for the District of Columbia is expected to issue a ruling on “remedies” that follows the Justice Department’s victory against the company sometime next month.
Judge Mehta held that Google violated antitrust law by boxing out rivals in the online search engine and online search text markets. To restore competition, he could order Google to refrain from longstanding exclusivity deals with the likes of Apple (AAPL) that set Google Search as the default option on the company’s smartphones.
Mehta could also force Google to sell off its Chrome browser, the most popular web browser in the world. That would put a dent in Google’s all-important search business, a dangerous proposition for the company.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on X/Twitter at @DanielHowley.
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