Last week, Google parent Alphabet reported second-quarter revenue and earnings that exceeded expectations. The company reported total revenue of $74.6 billion, representing a 7% increase year-over-year and exceeding estimates of $72.75 billion. Diluted earnings per share were $1.44, $0.12 higher than analysts predicted, reports Yahoo! Finance.

“There’s exciting momentum across our products and the company, which drove strong results this quarter. Our continued leadership in AI and our excellence in engineering and innovation are driving the next evolution of Search, and improving all our services. With 15 products that each serve half a billion people, and six that serve over 2 billion each, we have so many opportunities to deliver on our mission,” said Sundar Pichai, CEO of Alphabet and Google, in a July 26 news release.

Google advertising was $58.1 billion for the quarter, representing 77.9% of total revenue. Ad revenue is broken down into several categories:

Other quarterly highlights

Alphabet shared the following highlights for the second quarter:

• Google Cloud revenue was $8.0 billion for the quarter, and Google Services revenue, which includes advertising revenue, was $66.3 billion.
• Operating income for the second quarter was $21.8 billion, and operating margin was 29%.
• Net income for the quarter was $18.4 billion, or $1.44 diluted earnings per share.
• At the end of the quarter, the company had a headcount of 181,798 compared to 174,014 at the end of the second quarter in 2022. This includes the “substantial majority” of employees impacted by layoffs. Any additional employees to be laid off will be shown in the headcount by the end of 2023.
• During the first six months of 2023, Google recorded employee severance and related costs of $2.0 billion.
• The company is also trying to optimize current office space which resulted in total charges for the first six months of $633 million with $564 million being charged in the first quarter and the balance of $69 million in the second quarter.
• As of June 30, 2023, Alphabet had $118.3 billion in cash, cash equivalents and marketable securities.

“We’re very pleased with our financial results for the second quarter, which reflect an acceleration of growth in Search and momentum in Cloud,” said Alphabet and Google CFO Ruth Porat on the earnings call.

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Effective September 1, Porat will continue in her role as CFO and assume new roles as the company’s president and chief investment officer of Google and Alphabet.

“Ruth has worked to drive financial discipline and returns for shareholders, while spearheading investment to create sustainable, long-term value. As today’s results show, we’re making good progress and we’re committed to continuing this important work,” Pichai said. “In her new role, Ruth will strengthen our collaboration with policymakers and shape our corporate investments to have maximum economic impact for people and economies around the world.”

Stock value bump

Investors were pleased at the company’s results. The day before the earnings report was issued, Alphabet’s class A stock was valued at $122.21 per share. As of 5:28 p.m. EDT yesterday, stock was valued at $128.38, which is $5.36 shy of their 52-week high of $133.74.

Insider Take

The financial report does not address Google’s position on Canada’s Online News Act which was passed in June. Google will remove links to Canadian news from their Search, News and Discovery products, and they will no longer operate their Google News Showcase in Canada.

“Bill C-18 has become law and remains unworkable. The Government has not given us reason to believe that the regulatory process will be able to resolve structural issues with the legislation,” said Kent Walker, president of global affairs for Google and Alphabet, in a June 29 announcement.

“As a result, we have informed the Government that we have made the difficult decision that when the law takes effect we will be removing links to Canadian news from our Search, News, and Discover products and will no longer be able to operate Google News Showcase in Canada,” Walker added. “We’re disappointed it has come to this. We don’t take this decision or its impact lightly and believe it’s important to be transparent with Canadian publishers and our users as early as possible.”

It is not clear how this will affect Google’s bottom line in the third quarter and beyond.

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