Google's Q2 Earnings Surpass Expectations, Boosting ETFs and Investor Confidence

Google Heavy ETFs in Focus Following Upbeat Q2 Earnings

Alphabet GOOGL came up with better-than-expected second-quarter earnings on Jul 23 after market close. Earnings of $1.89 per share surpassed the Zacks Consensus Estimate of $1.85 by 2.16%. This marks an improvement from earnings of $1.44 per share recorded in the same period last year. GOOGL, which belongs to the Zacks Internet - Services industry, has added about 31% since the beginning of the year, outperforming the S&P 500's gain of 16.48%. However, even after beating revenue and profit estimates, shares of the tech giant fell about 2.77% during pre-market hours on Jul 24. Snapshot of Q2 Earnings The tech giant posted revenues of $71.35 billion for the quarter ended June 2024, surpassing the Zacks Consensus Estimate of $70.60 billion by 1.07%. This marked a substantial increase of 14.97% from the year-ago quarter. Alphabet's net income saw a substantial surge of 28.59% from the year-ago quarter to $23.62 billion. The company's operating income for second-quarter 2024 was $27.43 billion, which marked an increase of 25.85% from the year-ago quarter. Segment Snapshots First-quarter revenues from Google advertising reached $64.62 billion, up 11.13% from the year-ago quarter, highlighting robust demand for digital advertising, fueled by events such as the Paris Olympics and elections in multiple countries. The company's revenues from YouTube ads increased 13.02% from the same quarter last year, hitting $8.66 billion. Alphabet's Google Cloud business witnessed a substantial surge, driven by the widespread adoption of generative AI technology, with operating income skyrocketing to $1.17 billion, nearly tripling from the prior-year figure. Revenues from the segment also witnessed a rise of 28.84% year over year to $10.35 billion. According to Sundar Pichai, CEO of Alphabet, as quoted in the earnings release of the tech giant, the second quarter's better-than-expected performance highlights the momentum in the company's Search and Cloud segments. Revenues from Alphabet's Google Search & other segment generated $48.51 billion in the second quarter, a 13.79% surge from the year-ago quarter. Explore ETFs The earnings results might have a huge impact on ETFs heavily invested in this Internet giant. Here, we have highlighted ETFs with double-digit exposure to Alphabet. Communication Services Select Sector SPDR Fund () Communication Services Select Sector SPDR Fund seeks to track the performance of the Communication Services Select Sector Index with a basket of 22 securities. The fund has gathered an asset base of $19.25 billion and charges an annual fee of 0.09%. Communication Services Select Sector SPDR Fund has an exposure of 12.63% in GOOGL. The fund has gained 5.15% over the past three months and 32.94% over the past year. Vanguard Communication Services ETF () Vanguard Communication Services ETF seeks to track the performance of the MSCI US Investable Market Communication Services 25/50 Index, with a basket of 117 securities. The fund has amassed an asset base of $3.95 billion and charges an annual fee of 0.10%. Vanguard Communication Services ETF has an exposure of 12.58% in GOOGL. The fund has gained 5.59% over the past three months and 31.34% over the past year. Fidelity MSCI Communication Services Index ETF () Fidelity MSCI Communication Services Index ETF seeks to track the performance of the MSCI USA IMI Communication Services 25/50 Index with a basket of 106 securities. The fund has gathered an asset base of $1.17 billion and charges an annual fee of 0.08%. Fidelity MSCI Communication Services Index ETF has an exposure of 12.57% in GOOGL. The fund has gained 5.57% over the past three months and 30.80% over the past year. IShares Global Comm Services ETF () IShares Global Comm Services ETF seeks to track the performance of the S&P Global 1200Communication Services 4.5/22.5/45 Capped Index with a basket of 65 securities. The fund has gathered an asset base of $365.1 million and charges an annual fee of 0.42%. IShares Global Comm Services ETF has an exposure of 12.40% in GOOGL. The fund has gained 5.86% over the past three months and 31.20% over the past year. Want key ETF info delivered straight to your inbox? Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Alphabet Inc. (GOOGL) : Free Stock Analysis Report Vanguard Communication Services ETF (VOX): ETF Research Reports Fidelity MSCI Communication Services Index ETF (FCOM): ETF Research Reports iShares Global Comm Services ETF (IXP): ETF Research Reports Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Alphabet's Strong Q2 Results Beat Expectations

Alphabet surpassed revenue and earnings expectations as digital advertising and its cloud segment delivered impressive results. Alphabet (GOOG -5.03%) (GOOGL -5.04%), the tech giant behind Google, released its second-quarter earnings on July 23. The results showed strong performance, especially in revenue growth and cloud profitability, exceeding many analyst expectations. Alphabet reported revenue of $84.74 billion compared to the analysts' consensus estimate of $84.21 billion. Earnings per share (EPS) came in at $1.89, higher than the analysts' consensus estimate of $1.84. Overall, the quarter was assessed positively, driven by robust gains in digital advertising and Google Cloud. Overview of Alphabet Alphabet is a diverse technology company best known for its flagship product, Google Search. Its businesses span digital advertising, cloud services, and a range of technologies. Its core operations include Google Search, YouTube, and other online services. Recently, Alphabet has focused on AI innovations, bolstering its cloud segment and tackling privacy and compliance challenges. Critical to its success has been maintaining its dominance in digital advertising while expanding into new areas such as AI-enabled services and cloud solutions. Notable Achievements in Q2 Alphabet's second quarter was marked by impressive revenue growth, particularly in its core digital advertising segment. Revenue from its "Google Search and other" segment rose 13.8% to $48.51 billion. YouTube ad sales also saw a notable 13% increase to $8.66 billion. These gains were driven in part by the higher effectiveness of AI-driven advertising. Conversely, Google network revenue decreased by 5.22% to $7.44 billion from $7.85 billion. This highlights an area of potential concern, especially as competitors continue to pursue Alphabet's market share. In the AI domain, Alphabet launched new AI models, including Gemini and other large language models. The integration of Google DeepMind with Google Research will further accelerate AI model development, positively impacting the Google Services segment. Google Cloud's 28.9% revenue gain was a major highlight. The unit also turned a significant corner with an operating profit of $1.17 billion, a marked increase from $395 million in the prior-year period. These results underscore Alphabet's growing diversification of its revenue streams into areas beyond advertising. Strategic investments in high-risk, high-reward projects, known as "moonshots," continue to play a role. Revenue from its "Other Bets" segment increased by 28.1% to $365 million, although operating losses in the segment also rose by 39% to $1.13 billion. Operational expenses have been a focal point for management. Alphabet has been re-engineering its cost bases, underscoring CFO Ruth Porat's emphasis on stringent cost management. Foreign exchange headwinds and content acquisition costs have contributed to rising operational expenses. Looking Ahead While Alphabet did not provide specific financial guidance, management emphasized its ongoing investments in AI and cloud growth, and its cost-cutting efforts. Investors should keep an eye on the company's performance in the digital advertising space as competition in it intensifies. The evolution of Alphabet's Cloud services and the effectiveness of its significant investments in AI and frontier technologies will also be critical factors to watch in upcoming quarters.