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
-
The '8-Year Rule of Social Security' — A Retirement RuleThe '8-Year Rule of Social Security' holds that it's best to be like Ike — Eisenhower, that is. The five-star General knew a thing or two about good timing.
-
Should I Buy Stocks or Should I Buy Bonds Right Now?Generally speaking, stocks provide reasonable growth while bonds provide stable income. Each play important roles in diversified portfolios.
-
Should I Buy Stocks or Should I Buy Bonds Right Now?
Generally speaking, stocks provide reasonable growth while bonds provide stable income. Each play important roles in diversified portfolios.
-
You Were Planning to Retire This Year: Should You Go Ahead?If the economic climate is making you doubt whether you should retire this year, these three questions will help you make up your mind.
-
Are You Owed Money Thanks to the SSFA? You Might Need to Do Something to Get ItThe Social Security Fairness Act removed restrictions on benefits for people with government pensions. If you're one of them, don't leave money on the table. Here's how you can be proactive in claiming what you're due.
-
From Wills to Wishes: An Expert Guide to Your Estate Planning PlaybookConsider supplementing your traditional legal documents with this essential road map to guide your loved ones through the emotional and logistical details that will follow your loss.
-
Why Investing Abroad Could Pay OffCountries overseas are stimulating their economies, and their stocks are compelling bargains.
-
Are These the Next Stocks to Split?Interactive Brokers' recently split its stock to makes its shares more accessible to investors. Could these high-priced stocks be next?
-
Your Home + Your IRA = Your Long-Term Care SolutionIf you're worried that long-term care costs will drain your retirement savings, consider a personalized retirement plan that could solve your problem.
-
I'm a Financial Planner: Retirees Should Never Do These Four Things in a RecessionRecessions are scary business, especially for retirees. They can scare even the most prepared folks into making bad moves — like these.
