Cloud Stocks: Google Hones Its Search Tech


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Google’s (Nasdaq: GOOG) recent second-quarter results failed to meet the market’s expectations. The company is feeling the impact of macro-economic conditions as organizations brace themselves for the rising costs amid inflationary pressures.

Alphabet’s Financials

Alphabet’s net revenues for the second quarter grew 13% to $69.69 billion, falling short of the market’s forecast of $69.9 billion. EPS was $1.21 compared with $1.28 forecast by the market. A year ago, it had reported y-o-y revenue growth of 62%.

By segment, revenues from Google Search and other services grew 13.5% to $40.69 billion. Google Cloud revenues grew 35% to $6.3 billion and revenues from other bets grew to $193 million.

Among other key metrics, overall search revenues grew 24% to to $39.6 billion. YouTube revenues grew 15% to $6.9 billion.

Advertising revenues grew a modest 12% to $56.3 billion, as organizations globally managed their spending to align with the rising inflationary pressures. YouTube was the worst hit with sales growing only 5% compared with a whopping 84% growth reported a year ago. YouTube ad revenue was $7.3 billion.  

Google did not provide an outlook for the third quarter, but the market is looking for revenues to grow 14% to $293.9 billion.

Alphabet’s Growth Focus

To address the uncertain global economic outlook, Google is focusing on a strategy to invest in deep technology and computer science to build helpful products for the long term. It continues to invest in areas like AI, Search, and Cloud responsibly. Earlier this month, it announced the slowing down of its hiring and sharpening its focus as a company to hire for engineering, technical and other critical roles. It is working to improve productivity and ensure that the talent they do hire is aligned with its long-term priorities.

Within the products, it remains focused on building its AI capabilities. During the last quarter, it saw significant adoption of its AI-powered Google Lens. Visual searches on Google Lens were trending at more than 8 billion times per month. Last quarter, it added a new feature called multi-search that helps people find what they need using words and images at the same time. Later this year, multi search will be able to help people find local results near them. AI is also helping improve translation and Maps. It added 24 new languages to Google Translate, spoken by 300 million people. Within Maps, it added a new immersive view that uses computer vision, AI and billions of images to create high fidelity representations of places around the world.

Beyond AI, it is investing in augmented reality. It has been testing prototypes in its labs for delivering real-time translation and transcription. It will soon begin early testing of AR prototypes in real-world scenarios for this technology. Google is hoping to learn how these tools can help people in their everyday lives.

Within Commerce, it is helping people shop across Google more than 1 billion times each day. It is seeing hundreds of millions of shopping searches on Google Images each month. Merchants will soon be able to submit 3D images of their products to appear directly on Google Search so that customers can try before they buy.

Given the series of security issues faced recently, it rolled out a new machine learning model that identifies more than twice as many potentially malicious sites and phishing attacks, helping to contribute to a safer and more secure web. It also unified its password managers across Chrome and Android so that stored passwords can be grouped and protected across devices, apps on the web.

Google’s stock is trading at $114.22 with a market capitalization of $1.51 trillion. It had climbed to a 52-week high of $152.10 in November last year, and had fallen to a 52-week low of $108.44 in June.

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Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research ...

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