Shares of Google's parent company Alphabet (GOOGL) are tumbling Tuesday even after the tech giant beat analysts' top- and bottom-line expectations in its second-quarter earnings report.
In the quarter ended June 30, Alphabet said its revenue increased 14% year-over-year to $84.7 billion, boosted in part by a 30% jump in Google Cloud revenue to $10.3 billion. Its earnings per share (EPS) improved 31% over the year-ago period to $1.89.
This was the first time Alphabet's Google Cloud segment topped $10 billion in quarterly revenue and $1 billion in operating profit, said Ruth Porat, chief financial officer of Alphabet, in a statement. "As we invest to support our highest growth opportunities, we remain committed to creating investment capacity with our ongoing work to durably re-engineer our cost base."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Alphabet's total advertising revenue increased 11.1% year-over-year to $64.6 billion, including 13% year-over-year growth at YouTube to $8.7 billion. Still, this was slower than the 13% rise in ad sales seen in Q1, which some are saying is the reason for today's slump.
GOOGL's top- and bottom-line results exceeded analysts' expectations. Wall Street was anticipating revenue of $84.2 billion and earnings of $1.84 per share, according to CNBC.
"Our strong performance this quarter highlights ongoing strength in Search and momentum in Cloud," said Alphabet CEO Sundar Pichai in a statement. "We are innovating at every layer of the artificial intelligence (AI) stack. Our longstanding infrastructure leadership and in-house research teams position us well as technology evolves and as we pursue the many opportunities ahead."
Is Alphabet stock a buy, sell or hold?
Alphabet has turned in a strong performance on the price charts relative to its fellow Magnificent 7 stocks, up nearly 26% for the year to date. And Wall Street thinks the tech stock has even further to run.
According to S&P Global Market Intelligence, the average analyst target price for GOOGL stock is $202.50, representing implied upside of about 15% to current levels. Additionally, the consensus recommendation is a Buy.
Financial services firm Jefferies is one of the more bullish outfits on GOOGL stock with a Buy rating and $220 price target.
Alphabet's Q2 results were solid, but second-half comparisons do get tougher for its advertising segments, says Jefferies analyst Brent Thill. While an anticipated deceleration in Search and YouTube may be offset by the Paris Olympics, the presidential election, and AI-enhanced return on ad spend (ROAS), "we expect GOOGL can grind higher in the second half thanks to continued strength in core Search, potential for Google Cloud to further accelerate on AI, and additional margin surprises."
Jefferies' $220 price target represents implied upside of more than 25% to where GOOGL shares are currently trading.
Related Content
-
Trump's Immigration Policies and the Price of Home Healthcare: First 100 DaysPresident Trump's immigration policies may wallop your pocketbook if you rely on a home healthcare aide.
-
Stock Market Today: Stocks Extend a Quiet Winning StreakThe S&P 500 Index could actually close April with a monthly gain, which would be an extraordinary sign of market resilience.
-
Stock Market Today: Stocks Extend a Quiet Winning Streak
The S&P 500 Index could actually close April with a monthly gain, which would be an extraordinary sign of market resilience.
-
How Trump's First 100 Days Have Impacted Your PortfolioPresident Trump's first 100 days in office have been busy, with a flurry of executive orders sparking volatility in the stock and bond markets.
-
Is It Still Worth It to Gift Savings Bonds?Kiplinger editor explores if it's still a good idea to get savings bonds as gifts for children, looking at their returns and usability.
-
Don't Veer Off Course at the First Sign of a Squall in the MarketsWhen markets go nuts and investor sentiment drops, you can keep your sanity by trusting in and sticking with your long-term plan.
-
How Business Owners Can Prepare for a Terminal DiagnosisThe most important thing is readiness, whether the owner faces a life-changing diagnosis or an employee does.
-
Advisers, Take Note: How 2025 Social Security Changes May Impact Your ClientsWhat financial advisers might need to know to help their clients navigate Social Security in 2025.
-
Stock Market Today: Have We Seen the Bottom for Stocks?Solid first-quarter earnings suggest fundamentals remain solid, and recent price action is encouraging too.
-
Social Security Is Taxable, But There Are WorkaroundsIf you're strategic about your retirement account withdrawals, you can potentially minimize the taxes you'll pay on your Social Security benefits.
