Photo Credit: Pawel Czerwinski on Unsplash

Yesterday, Alphabet aka Google (Nasdaq: GOOG) announced its first quarter results that soared past market expectations. The stock climbed 5% in the after-hours trading session post results announcement.

Alphabet’s Financials

Alphabet’s revenue grew 12% to $90.23 billion, ahead of analyst estimates of $89.12 billion. EPS grew 46% to $2.81, beating analyst estimates of $2.01. 

Google’s advertising revenues grew 8.5% to $66.89 billion with YouTube advertising revenues at $8.93 billion. Search segment grew 10% to $50.7 billion. Cloud computing revenues grew 28% to $12.26 billion, slightly below analysts’ expectations of $12.27 billion. Its Other Bets segment brought in $450 million, down 9% over the year.

There is a growing trend of users switching to AI instead of using traditional search engines. A recent survey revealed that 27% of respondents in the US use AI tools instead of search engines and 13% users in the UK favored AI tools. The speed, ease of use and more contextual responses were driving users to switch to AI usage. Google is trying to address this by providing its own AI overview section on top of Google’s search results. AI Overviews is growing rapidly and now has 1.5 billion users per month, compared with 1 billion in October.

The Acquisition of Wiz

Last month, Google announced plans to acquire Israeli cloud cybersecurity firm Wiz for an estimated $32 billion – making this its biggest acquisition ever. Wiz was founded in 2020 by Assaf Rappaport, Yinon Costica, Roy Reznik, and Ami Luttwak. Prior to founding Wiz, the four founders had founded another cloud security firm called Adallom.

Wiz specializes in cloud-native application protection to offer agentless, real-time visibility, and control over vulnerabilities, misconfigurations, and access permissions across public cloud environments. Analysts estimate that Wiz was generating an ARR of $700 million at the time of its acquisition. Last year, Wiz was valued at $12 billion. The transaction comes a few months after Wiz abandoned plans to go public.

Wiz is known for its easy-to-use security platform that is cloud agnostic and can connect to all major clouds and code environments. The acquisition will help Google address two large and growing trends of improved cloud security and multi-cloud capabilities. The integration will help Google offer customers access to improved security tools that are designed, operated and automated, provide the customers with the ability to scale cybersecurity teams, lower their customers’ cost of implementing and managing security controls, and boost the adoption of multi-cloud security. Besides bolstering Google’s cybersecurity presence, the acquisition will help Google strengthen its enterprise presence to better compete with Microsoft which already had an embedded cybersecurity product.

Google’s AI Growth

During the quarter, Google continued to add to its AI portfolio. It recently announced several updates to its Workspace products that will help drive productivity. Some of the recent features include the addition of Audio Overviews that lets Gemini create podcasts based on uploaded documents and slides. Users can also get Gemini to generate audio overviews within deep research reports. Gemini is also helping streamline meeting tracking by adding meetings and events to calendars, highlight emails with appointments in case users miss them, and alert users about meetings.

Meanwhile, Google continues to deal with several legal cases challenging its monopolistic practices. Recently, a court in Virginia ruled that Google was maintaining its search monopoly by blocking defaults and browsers on devices. Last year, the US Department of Justice had demanded that Google sell Chrome to stop these monopolistic practices. Google is contesting the ruling and does not want to put up Chrome for sale. But there is already a queue of buyers ready to buy Chrome. OpenAI has mentioned its interest in buying Chrome, as has Perplexity.ai.

Google’s stock is trading at $161.47 with a market capitalization of $1.95 trillion. It hit a 52-week high of $208.7 in January this year and a 52-week low of $142.66 in March this year.

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