4 Key Takeaways From Google Parent Alphabet's Earnings Call

After Google genitor Alphabet (GOOGL) reported second-quarter results that hit analysts' expectations driven by Google Cloud and hunt strength, executives updated investors connected nan company's investments successful artificial intelligence (AI), outlook, and more.

CEO Sundar Pichai Says Risk of Underinvesting successful AI Outweighs Overinvesting Fears

As large tech companies boost superior expenditures to put successful AI, raising concerns astir higher costs, Alphabet CEO Sundar Pichai said "the consequence of underinvesting is dramatically bigger than nan consequence of overinvesting for america here."

Pichai said that successful a business wherever nan institution is overinvesting successful AI, existent investments directed astatine infrastructure solutions for illustration information centers could besides beryllium utilized for different tasks.

The CEO added that "not investing to beryllium astatine nan front" of nan AI title "definitely has overmuch much important downsides" for Alphabet.

Increased Search Usage and User Satisfaction With AI Overviews

Pichai besides said nan institution is seeing "positive trends" from rolling retired its AI Overview tool, which summarizes nan contented from hunt astatine nan apical of nan page.

The institution reported higher hunt usage and accrued personification satisfaction, pinch a emergence successful engagement from younger users driven by AI Overviews.

"AI Overviews proceed to supply valuable options for group to return action and link pinch businesses beyond AI Overviews" arsenic "AI expands nan types of queries [Google is] capable to reside and opens up powerful caller ways to search," Pichai said.

Operating Margins To Grow successful Fiscal 2024, But Could Lag successful Q3

Alphabet CFO Ruth Porat told investors that while nan institution expects to present operating separator description for nan afloat fiscal 2024 twelvemonth compared to 2023, nan 3rd 4th could beryllium negatively affected by depreciation and higher expenses, successful portion acknowledgment to AI investments.

Increased spending associated pinch nan timing of payments for Alphabet's continued AI investments and an upcoming Google Pixel motorboat were among nan reasons cited for nan emergence successful expenses.

Porat said that Alphabet's superior expenditures successful nan 2nd 4th totaled $13 billion, and nan institution expects spending for nan remainder of 2024 to beryllium astir $12 cardinal quarterly.

Google Cloud Strength Supported by AI Offerings

Porat said generative AI offerings are "adding to nan spot of nan [cloud] business," which helped thrust nan company's better-than-expected results, pinch nan mostly of Google Cloud's apical 100 customers utilizing Alphabet's genAI solutions.

In nan 2nd quarter, Google Cloud's separator improved, which Porat said "reflects nan gross spot that [the unreality segment] delivers and each of nan [company's] ratio efforts."

Alphabet said it is prioritizing costs guidance arsenic it increases spending to put successful AI.

Shares of Alphabet were down astir 1.6% astatine $178.80 successful extended trading arsenic of 6:40 p.m. ET Tuesday aft nan call.