Alphabet’s second-quarter profit beat Wall Street expectations on Tuesday as steady demand for its cloud services and a rebound in advertising boosted sales. The Google parent also announced that its long-time CFO, Ruth Porat, would assume a new role while the company sought a new finance chief.
Porat will become chief investment officer and president starting September 1. She’ll also lead 2024 planning while the search for a replacement continues. She was hired in 2015 and led tremendous growth at Alphabet.
Investors were heartened by Alphabet’s results, which came ahead of analyst estimates and helped to soothe worries about slowing global economic growth. The results were also the first since Alphabet split its business into two segments, one for its core Google search engine and another for its motley moonshots such as self-driving cars and health tech.
The broader Google division saw revenue jump by 26% to $27 billion in April-June, with advertising revenue up 20%. That included strong growth in YouTube ad sales as people stayed home and looked for entertainment and political ad spending ahead of November’s U.S. election.
However, the coronavirus pandemic caused advertisers to stop spending in many areas, including travel and leisure. That hit the results for Google’s “other revenues,” which include hardware, digital content, and Google Play purchases. But the division was also boosted by people seeking out apps that help them deal with the flu.
Sales of cloud services, which are becoming more critical to Alphabet’s bottom line, jumped by 43% in the quarter. That helped to offset a slump in the ad business, which is crucial to the company’s profitability.
During the conference call, Alphabet executives emphasized that they still expect strong growth in its cloud business this year, even as it faces competition from traditional players and upstarts.
The business has been gaining traction as users shift from relying on traditional systems like Microsoft and IBM to a more centralized platform that gives them real-time access to data and applications. It’s a key driver for Alphabet’s Other Bets portfolio, which includes its longer-term gambits in areas such as self-driving cars, health care, and space travel. However, analysts were keen to hear the executives provide more color on how the division could turn those investments into revenue. They also want to know more about the ad market’s financial challenges. The company’s shares jumped about 8% in after-hours trading. Shares of rival Microsoft were down slightly after it also reported results on Tuesday, while those of Meta, a Google competitor highly dependent on ad sales, rose as much as 2%.