#GOOGLEarningsBeatButStockDrops3%

Alphabet Beats Expectations, But High AI Costs Weigh On Shares Alphabet, Google's parent company, came out of the gate with a fire Second-Quarter earnings report, blowing Wall Street out of the water across its main lines. This resulted in revenues of $119.8 billion, a 24% jump year over year, and 82% of this was driven by its cloud business alone, reaching a sales total of $24.8 billion. The report seemed perfect but surprisingly, shares dropped in after hours by more than three percent, not due to a failure to perform but due to an increasing investor fixation with just how large a price tag to stay at the forefront of the Artificial Intelligence race.

Google raised its annual CAPEX to $195-$205 billion this quarter, raising it another fifteen billion, of course, you can figure most of that is the cost of putting data centers and computational power into the infrastructure to do AI.

So there comes your money to do that. However, the biggest red flag was in Alphabet's free cash flow statement. For the Second Quarter, free cash flow came in at minus five billion nine hundred million dollars, something you simply rarely see from one of the worlds best tech companies. While investment in AI may be beneficial to Google for future productivity, traders see the real question of returns as crucial for such large expenditures.

But, in the face of this, Alphabet Cloud revenue is moving rapidly in the face of strong company demand for cloud solutions, coming in with backlogs greater than500 billion for the coming decade.

Ultimately, the Alphabet report speaks for how the general technology world is responding to these AI investments. On one end investors give the AI growth to the technology sector a boost while on the other hand asking whether this kind of investment is viable in the long run and profitable. For technology company’s investing in AI there becomes a tough choice of investing as much money as needed to keep the pace or convincing owners of stock that these kinds of heavy expenditures will not come back to bite their shareholders.

In Alphabets eyes nothing short of great numbers comes and it seems we have all been proven wrong; however, with every great financial statement from the biggest of tech companies in 2024 come the basic of question “How much does it make.” Will this AI venture work for google in the long run or not?

What do you think?

‍#Google #GateSquare