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Google parent Alphabet crushes forecasts as ad revenue roars back

Google owner Alphabet Inc reported second quarter earnings after the close Tuesday that smashed market expectations as advertising revenue came roaring back in a post-pandemic rebound. For the three months to June 30, the tech giant and FAANG stalwart reported a net income of US$18.5bn, up from US$6.9bn the year before, while revenues soared 62% to US$61.8bn, ahead of market predictions of US$56.2bn. The upswing was driven primarily by a massive jump in Google’s ad revenues, which surged 69% year-on-year to US$50.44bn, while also receiving a boost from a massive 83% increase in YouTube ad revenue to US$7bn. Alphabet also saw some good news from its Google Cloud business, which saw operating losses narrow to US$591mln from US$1.43bn last year. “In Q2, there was a rising tide of online activity in many parts of the world, and we’re proud that our services helped so many consumers and businesses. Our long-term investments in AI and Google Cloud are helping us drive significant improvements in everyone’s digital experience”, Alphabet chief executive Sundar Pichai said in a statement. “Our strong second quarter revenues of US$61.9bn reflect elevated consumer online activity and broad-based strength in advertiser spend. Again, we benefited from excellent execution across the board by our teams”, added CFO Ruth Porat. The strong results sent Alphabet shares up 3.2% to US$2,722 in after-hours trading on Tuesday. “With confidence returning to economies inching out of lockdowns, marketing departments are loosening the purse strings. As the sales of goods and services move online, Google is gathering an ever-increasing share of global advertising spend. That means Google is enjoying a growing share of a pie that is itself expanding quickly. A rising tide lifts all boats, but Google is a veritable hovercraft compared to the familiar names of the “old media”, said Nicholas Hyett at Hargreaves Lansdown. “As a software platform provider, Alphabet enjoys incredible operating leverage, which is to say its revenues feed through to profits at a pace other companies could only dream of…Spectacular growth, incredible cash generation and multiple category killing products all at a fairly reasonable 30 times future earnings. It’s difficult to find things not to like at Alphabet”, he added.