Google faced a setback on Monday when the cybersecurity start-up Wiz rejected its $23 billion acquisition offer, a deal that could have given momentum to its cloud-computing operations.
On Tuesday, Google’s parent company Alphabet reminded investors that it’s doing just fine even without the deal.
The tech giant reported strong revenue growth in its search advertising business and a rising profit, though the increase in YouTube ad sales fell short of expectations.
In the second quarter, Alphabet posted $84.7 billion in quarterly sales, up 14 percent from a year earlier and narrowly exceeding analysts’ estimate of $84.1 billion, according to data compiled by FactSet.
The company’s profit climbed 29 percent, to $23.6 billion, beating Wall Street’s expectation of $22.7 billion.
The results reminded investors of the stability of Google’s advertising-fueled consumer services, which are used by billions of people, even as the company searches for additional sources of revenue.
In the wake of the failure to acquire Wiz in a bid to strengthen Google Cloud, attention will return to Google’s aggressive rollout of artificial intelligence. Already, the company has incorporated generative A.I. into all of its products and increased its spending on data centers and associated hardware to underpin the technology. Now the question is, can Google make money from those investments?
Sundar Pichai, Alphabet’s chief executive, said in a statement that the company is innovating in A.I., which would position it “well as technology evolves and as we pursue the many opportunities ahead.”
Alphabet said that it spent $13.2 billion on capital expenditures in the second quarter, surging 91 percent from $6.9 billion a year earlier.
Google has largely overcome a digital advertising slump that began in 2022 in the midst of economic uncertainty, rising interest rates and inflation. The company’s search engine and video platform YouTube remain the two most visited websites in the world, according to data from Similarweb, which tracks tech market share. That makes them essential destinations for advertisers looking to reach consumers.
One component of Google’s ad business had long been the use of third-party cookies, bits of code that — among other things — help tech companies, publishers and advertisers track web users to show them ads. On Monday, Google said it no longer planned to get rid of third-party cookies on its Chrome web browser.
Google had first announced the plan to kill cookies in 2019, saying it would give internet users more privacy. Regulators and the rest of the digital ad industry were skeptical of the company’s approach, causing it to delay the proposal numerous times. Now, it says it will let Chrome users decide if they want to allow third-party cookies or not.
Revenue from Google’s search engine, its largest business, rose 14 percent to $48.5 billion in the second quarter, above analysts’ estimate of $47.6 billion.
Advertising sales at YouTube climbed 13 percent to $8.7 billion, missing the $8.9 billion expected by analysts.
Google Cloud, the company’s division that offers software and technology services to other businesses, recorded a 29 percent increase in revenue, to $10.3 billion. Analysts had estimated $10.2 billion. It is a slower pace of growth than in previous years. The division reported an operating profit of $1.2 billion in the second quarter, its biggest profit on record.
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