Alphabet Inc. reported second-quarter results that exceeded Wall Street expectations on earnings and revenue, driven by strong cloud growth, although its search advertising business narrowly missed analyst estimates.
The Google parent posted cloud revenue of $24.77 billion for the quarter ended June 30, an 82% increase from a year earlier and ahead of Bloomberg-compiled analyst estimates of $22.46 billion.
Search advertising revenue came in at $63.27 billion, slightly below expectations of $63.28 billion.
After stronger-than-expected quarterly performance, Alphabet GOOGL shares gained about 0.8% in after-hours trading on Wednesday after previously closing at $342.09 in New York.
Cloud growth outpaces expectations
Alphabet’s cloud business remained a key driver of quarterly performance, delivering revenue well above analyst expectations.
Ahead of the release, analysts surveyed by LSEG had expected Alphabet to report second-quarter revenue of $116.93 billion, representing year-over-year growth of 21.3%.
Cloud revenue had been forecast to maintain growth of about 64%, while advertising revenue was expected to rise 13.7%.
The reported cloud sales of $24.77 billion grew by 82%, significantly exceeding estimates, reflecting continued demand for cloud services as enterprises expand artificial intelligence deployments.
However, search advertising revenue narrowly missed expectations, coming in just below consensus estimates.
The search business remains Alphabet’s largest source of revenue, making its performance a closely watched metric for investors.
Earnings beat as AI spending remains under scrutiny
Alphabet also reported adjusted earnings per share of $9.11, well above Wall Street’s consensus estimate of $2.88 per share, according to FactSet. The result represented a 294% increase from the prior year.
Quarterly revenue totaled $199.8 billion, exceeding analyst expectations of $117.1 billion.
The company is the first of the major US technology companies to report earnings this season, making its results an important indicator for the broader technology sector.
Investors have been closely monitoring whether Alphabet’s growing investments in artificial intelligence are translating into stronger financial performance.
The company is expected to spend more than ever on capital expenditures this year as it competes in the AI race, with spending focused on data centers and AI infrastructure.
Investors remain focused on AI investment returns
Although Alphabet delivered stronger-than-expected earnings and cloud revenue, investors continue to assess whether the company’s record AI spending will generate sustainable long-term growth.
The results are expected to intensify scrutiny of Alphabet’s artificial intelligence strategy as Wall Street looks for evidence that higher capital expenditure is creating new revenue opportunities rather than reducing profitability.
Alphabet’s earnings also set the tone for the broader technology sector, with several major companies scheduled to report in the coming days.
Many of the largest technology firms have collectively committed hundreds of billions of dollars toward AI infrastructure, making upcoming earnings reports an important test of whether those investments are beginning to deliver measurable returns.
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