Alphabet Stock Climbs After Earnings As Google Cloud Sales Soar

Google Cloud generated over $8 billion in revenue during Q2 2023, helping Google’s stock price climb seven percent following Google’s financial earning report tonight.


Sundar Pichai

Alphabet’s stock rose seven percent in after-hours trading following the company’s second quarter 2023 financial earnings report, highlighted by Google Cloud generating over $8 billion in revenue for the first time ever as the cloud company made a profit for the second quarter in a row.

“Google Cloud saw continued growth with Q2 revenue of $8 billion, up 28 percent, and an operating profit of $395 million,” said Alphabet CEO Sundar Pichai during the company’s second quarter earnings call today. “With Google Cloud, we’ve been really embracing an open architecture. We’ve embraced customers wanting to be multi-cloud when it makes sense for them.”

Alphabet’s [Nasdaq: GOOGL] stock price rose from $122.21 per share at market close on Tuesday to $130.45 per share in after-hours trading Tuesday.

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Alphabet’s cloud computing business bested Wall Street’s revenue expectations of approximately $7.8 billion by reporting second quarter 2023 sales of $8.03 billion, an increase of 28 percent year over year.

Mountain View, Calif.-based Google Cloud’s $395 million in operating income was a big improvement compared to an operating loss of $590 million year over year.

Sundar Pichai On Google AI, Generative AI

One of the biggest talking points during Google’s earnings call today was around artificial intelligence, specifically, generative AI.

“Our AI-optimized infrastructure is a leading platform for training and serving generative AI models,” said Pichai. “More than 70 percent of gen AI unicorns are Google Cloud customers, including Cohere, Jasper, Typeface and many more.”

Alphabet’s CEO said AI will enable Google Cloud to expand its total addressable market and allow Alphabet to win new customers.

“The scale of investments that we can directly bring to cloud now—we have over 80 models across Vertex [AI], Search and conversational AI—and we are taking all of them and translating it into deep industry solutions. So I’m excited about it,” said Pichai.

Google’s gen AI capabilities are also expanding the company’s partner ecosystem, “with hundreds of ISVs and SaaS providers such as Box, Salesforce and Snorkel, and the world’s largest consulting firms like Accenture and Deloitte,” Pichai said. “They’ve collectively committed to train more than 150,000 people on Google Cloud generated AI.”

Google Cloud’s Sales Growth, Operating Profits

After years of generating an operating loss, Google Cloud turned a profit of $191 million in Q1 2023 for the first time in the company’s history.

The company has historically been in the red for profitability, typically generating hundreds of millions of dollars in operating losses every quarter. For example, in 2022, the company reported an overall operating loss of $1.9 billion for the year.

However, Google Cloud’s operating income of $395 million in the second quarter shows that the company is heading in the right direction.

On the sales growth front, Google Cloud’s 28 percent year over year sales growth in the second quarter is on par with previous quarters.

In Q1 2023, Google Cloud grew total revenue by 28 percent year over year. In Q4 2022, the company generated $7.3 billion in revenue, representing year over year sales growth of around 30 percent.

Google Cloud sales includes infrastructure and platform services, collaboration tools, and other services for customers. Google’s cloud arm generates revenue from fees received for Google Cloud Platform (GCP) services, Google Workspace communication and collaboration tools, and other enterprise services.

Alphabet Q2 2023 Earnings

Google Cloud’s parent company generated a total of $74.6 billion, representing an increase of 7 percent year over year.

Alphabet reported operating income of $21.8 billion, up from $19.4 billion in second quarter 2022. The technology giant captured $18.4 billion in net income during the quarter, up from $16 billion year over year.

“AI helps us differentiate our core products,” said Pichai. “If you take a look at cybersecurity, we are deeply incorporating AI to drive profound changes there. So overall, I’m excited. I view this as a long-term opportunity and all the investments we’re doing in AI across Alphabet—including the work we’re doing in Google DeepMind, and Google research and on Gemini and so on—are directly applicable to cloud as well. So I’m excited about that.”