Google Q2 2024 Earnings Analysis
Dive into $GOOG $GOOGL Google’s Q2 2024 earnings with review of financial performance, key metrics, operating expenses, dilution, customer growth, future outlook
Financial Results:
↗️$84,742M rev (+13.6% YoY, 15.4% LQ) beat est by 0.6%
↗️Operating Margin (32.4%, +3.1%pp YoY)🟢
↘️FCF Margin (15.9%, -13.3%pp YoY)
↗️Net Margin (27.9%, +3.3%pp YoY)
↗️EPS $1.89 beat est by 2.2%
Segment Revenue
➡️Google Services $73,928M rev (+11.5% YoY, 40.1% Op Margin)🟡
➡️Google advertising $64,616M rev (+11.1% YoY)🟡
↗️Google Search & other $48,509M rev (+13.8% YoY)
➡️YouTube ads $8,663M rev (+13.0% YoY)🟡
↘️Google Network $7,444M rev (-5.2% YoY)🟡
↗️Google Cloud $10,347M rev (+28.8% YoY, 11.3% Op Margin)🟢
↗️Other Bets $365M rev (+28.1% YoY, -310.7% Op Margin)
Operating expenses
↗️S&M/Revenue 8.0% (8.0% LQ)
↘️R&D/Revenue 14.0% (14.8% LQ)
↘️G&A/Revenue 3.7% (3.8% LQ)
Headcount
↗️179,582 Total Headcount (-1% YoY, -1,313 added)
Dilution
↗️SBC/rev 7%, +0.4%pp QoQ
↗️Basic shares down -2.6% YoY, +0.3%pp QoQ🟢
↗️Diluted shares down -2.1% YoY, +0.2%pp QoQ🟢
Key points from Google’s Second Quarter 2024 Earnings Call:
Google Cloud:
Google Cloud achieved major financial milestones, including surpassing $10 billion in quarterly revenues for the first time and achieving over $1 billion in quarterly operating profit.
The platform continues to attract major brands such as Hitachi, Motorola Mobility, and KPMG, demonstrating strong and growing customer interest.
Google Cloud's AI infrastructure and generative AI solutions have generated billions in revenues year-to-date, being used by over 2 million developers.
The deepening partnership with Oracle is expanding joint offerings, substantially enhancing Google Cloud’s appeal to large enterprises.
Through Vertex, Google Cloud is enabling large enterprises to develop powerful AI agents, highlighting its role as a core platform for enterprise AI solutions.
Strategic Focus on AI:
Sundar Pichai introduced the Gemini model family, which includes various sizes tailored for different use cases, extending from data centers to devices. These models power significant improvements across Google's core products, helping to provide more capable and efficient services.
Showcased at the Google I/O, Project Astra demonstrates Google’s advances in multimodal understanding and conversational AI, aiming to build a universal agent that can be useful in everyday interactions.
The focus is on in-house development to quickly adapt to evolving technology, as exemplified by their TPUs and the new Trillium model, which improves compute performance and energy efficiency.
Search Innovations:
AI overviews have been rolled out to enhance Google Search, offering better responses to a broader range of queries. This feature has increased user engagement and satisfaction, especially among younger users.
Innovations such as Circle to Search on Android devices and the ability to ask questions through Google Lens by taking videos are driving higher usage of visual search tools.
Expansion and Investment:
Alphabet announced expansions in infrastructure, including new data centers and cloud regions in Malaysia, Iowa, Virginia, and Ohio, to support AI advancements.
YouTube Enhancements:
New AI-driven features on YouTube are improving content creation and viewer engagement. For example, creators can now add captions automatically and convert videos into shorter formats (Shorts) more easily.
AI is also being used to enhance ad placements and performance on YouTube, helping creators and advertisers achieve better engagement and returns on their content.
Leadership Transition:
Ruth Porat’s transition to a new role and the appointment of Anat Ashkenazi as the new CFO mark a significant leadership change, with a continued emphasis on strategic investments and financial discipline.
Future Outlook:
Alphabet continues to invest in its technical infrastructure to support its AI and cloud computing initiatives.
The focus on AI-driven cloud services is expected to continue driving revenue growth.
New AI-powered advertising features are being introduced across Google’s platforms, promising more effective and engaging advertising solutions that cater to the evolving needs of advertisers.
Management comments on the earnings call.
Product Innovations:
Sundar Pichai: "In terms of product innovation, we are seeing great progress with AI overviews. Over the past 25 years, we have continued to reimagine and expand Google Search across many technological shifts."
Generative AI:
Sundar Pichai: "Our AI product advances come from our long-standing foundation of research leadership, as well as our global network of infrastructure... We are innovating at every layer of the AI stack, from chips to agents and beyond, a huge strength."
YouTube:
Philipp Schindler: "YouTube ads revenues were up 13% year-on-year driven by growth and brand as well as direct response. We had a great brand cast this quarter, and I'm pleased at the progress here."
Future Outlook:
Ruth Porat: "Looking forward, we continue to expect to deliver full-year 2024 Alphabet operating margin expansion relative to 2023... We continue to invest aggressively in the business, reflecting our strong commitment to long-term growth particularly through advancements in AI and cloud services."