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."
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free 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
-
Medicare Prior Authorization Expands to Ambulatory Surgical CentersStarting in December, Medicare will begin requiring prior authorization for certain procedures when performed in ambulatory surgical centers.
-
Frontier’s GoWild! Annual Flight Pass: Is the $299 All‑You‑Can‑Fly Deal Worth It?Frontier’s GoWild! Pass offers unlimited flights for $299, but blackout dates, standby rules, and fees apply. See who benefits and if it’s worth it.
-
Stocks Slip as Job Growth Stalls: Stock Market TodayThe August jobs report came in much weaker than expected, while the unemployment rate ticked higher.
-
Dismal August Jobs Report Offers Rate-Cut Relief: What the Experts Are SayingThe August jobs report came in much lower than expected, lifting the odds that several rate cuts will come through by year's end.
-
Greed, Fear and Market Volatility: A Financial Adviser's Guide to Keeping Emotions Out of Investment DecisionsDon't panic! And don't be so confident in the stock market that you overlook risk. Instead, be logical. Your retirement security could depend on it.
-
Want a Financial Adviser Who Shares Your Faith? Look for One With a CKA DesignationFinancial professionals with a Certified Kingdom Advisor certification are committed to integrating biblical principles with sound financial advice.
-
S&P 500 Hits New High on Jobs Friday Eve: Stock Market TodayThe S&P 500 hit a new all-time closing high and most of the stocks in the Dow Jones Industrial Average were up the day before a critical jobs report.
-
SPACs, SMRs and How to Invest in the Nuclear InsurgencyBig nuclear deployments are in process, but small modular reactors could be a better way to meet rapidly rising electric power demand.
-
10 Ways to Stay Safe From Grandparent Scams and Other Fraud, Courtesy of a Financial PlannerScams are increasingly hard to detect, and anyone can be fooled, from older people to educated professionals. Here are 10 ways to avoid becoming a victim.
-
This Is How the Student Loan Bubble Is Primed to Pop, From a Student Funding ExpertFueled by easy money, inflated tuition and high default rates, the student loan bubble mirrors the 2008 subprime mortgage crisis. We could be headed for a potential financial collapse. What can we do?
