Google CEO Sundar Pichai speaks onstage during the annual Google I/O developers conference in Mountain View, California, May 8, 2018.
Stephen Lam | Reuters
Shares of Alphabet’s stock jumped 10% this week after the company reported second quarter earnings that showed growth despite a tough ad market.
Share price for the Google parent company reached $132.58 as of Friday’s market close, representing its highest close price in more than a year.
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Google has faced a lot of noise this year around the health of its core search business, due to a slumping digital ad market and the longer-term potential for artificial intelligence chatbots to take traffic.
But, its second quarter earnings report Tuesday, the company showed it has any numbers of ways to succeed despite those very real challenges. Among growth, revenue rose 7% to $74.6 billion from $69.7 billion in the year-earlier period.
Online advertising, which has been a difficult market for the past year, remains slow because of economic concerns and corporate cost cutting. Google’s ad revenue only increased 3.3% from a year earlier, but that’s an improvement from the first quarter, when ad revenue fell. And it came after Snap’s second-quarter report issued a disappointing forecast, sending the stock down almost 20%.
Google’s YouTube and Cloud units also showed revenue growth despite competition.
“Revenue growth outpaced expense growth for the first time in a while,” wrote Bernstein analysts in a note following the earnings report.
Google’s stock jump also came despite Alphabet chief finance officer Ruth Porat, who has overseen companywide cost-cutting, announced she’s leaving that role after eight years to assume the newly created position of president and chief investment officer.
Search revenue, which makes up the majority of Google’s ad business, also saw steady growth during the quarter. That was a relief to investors, some of whom have grown concerned that traditional search users will be moving to generative AI chatbots from OpenAI and Microsoft, the startup’s main investor, for their online queries.
“We believe this bodes well for the broader online advertising environment,” Citi analysts wrote in a note about Google’s earnings. “That said, we do not believe this is a ‘rising-tide’ environment, rather we favor those platforms that have invested in newer products and services.”