Alphabet bets on generative AI as cloud boosts Q2 revenue

Alphabet on Tuesday reported a 7% increase in revenue for the quarter ended June driven by the growth in its cloud computing division, Google Cloud.

The company posted revenue of $74.6 billion compared to $69.7 billion in the corresponding period last year. Net income for the company rose to $18.36 billion from $16 billion during the same period last year.

Despite macroeconomic uncertainty affecting customers’ cloud expenditure, Google Cloud maintained its growth momentum, reporting a 28% increase in revenue. The division’s net sales stood at $8 billion compared to $6.27 billion for the same period last year.

For the quarter ended March, the unit’s revenue grew 28% to reach $7.45 billion.

Google Cloud reported an operating profit of $395 million for the quarter ended June compared to an operating loss of $590 million for the same period last year.

The previous quarter had seen the division post its first-ever operating profit since inception.

The increase in operating profit, according to Alphabet CEO Sundar Pichai, can be attributed to the company’s progress in data center machine efficiency.

Generative AI to act as the pillar for growth

Alphabet’s new AI-based services and offerings were the biggest contributors to Google Cloud’s growth momentum, according to Pichai and other top executives at Alphabet.

“Our new generative AI offerings are expanding our total addressable market and winning new customers. We are seeing strong demand for the more than 80 foundational models, including third-party and popular open source in our Vertex, search, and conversational AI platforms, with the number of customers growing more than 15x from April to June,” Pichai said during the earnings call, according to a transcript from The Motley Fool.

Pichai said more than 70% of generative AI unicorns are Google Cloud customers, including Cohere, Jasper, and Typeface.

Generative AI capabilities, according to the company, have also helped it to win new Google Workspace customers as the productivity suite saw increases in both seats and average revenue per seat for the quarter. The company is expected to add new generative AI capabilities to its Search and Google Ads offerings.