#GOOGLEarningsBeatButStockDrops3%

Alphabet's stellar results were more than enough to justify expectations given booming AI demand, so why is the Google stock down? Alphabet posted strong earnings yesterday that suggested business demand for cloud computing and the company’s AI and other services remain astronomically high. After Q2 Alphabet reported revenues of $119.8 billion on year-over-year revenue growth of 24%, with the most outstanding component being Google’s cloud business whose revenues grow 82% Year-over-Year to $24.8 billion, which is a major strong a quarter by this business division.

These revenues were considerably ahead of market expectation, yet, shares for the Google-Parent dropped over 3% during aftermarket.

The fact that after hours shares plunged indicates that investors aren’t only interested inrevenuegrowth figures – they want to take a look at where the “new money” or current “high levels” of money that Alphabet is investing the build-out of this future AI ecosystem. The biggest concern for investors was the ever-higher spend fromAlphabet. After issuing new guidanceAlphabetraised the outlook for full-year capital expenditures to between $195 billion and $205 billion, raising that range by $15 billion from its previous forecast of $180 billion and $200 billion. Those expenditures are being spent towards growing Alphabet’s AI-related capacity, ranging from data centers and super computing to developing newer, next-gen AI models.

Also watched by the markets was the company’s free cashflow.

In Q2, Alphabets’ free cashflow was negative in the amount of -$5.9 billion. It is rare to see Alphabet reports negative cash flows. This means that thoughAlphabet’spending on AI infrastructure could be seen to position Alphabet strongly in AI for long, markets would like to see how long until they start receiving profits.

In positive contrast, Alphabet’s cloud business remains a force for the tech giants in building up significant momentum – Google now has an order backlog of over $500 million. So we can see, that current AI leaders can get high demand, but not necessarily can do anything they want due to the selection of markets based upon capital efficiencies and long term returns of those investments. The question that the markets want to answer is no longer which one wins the race in developing cutting-edge Artificial intelligence - but the question will be which among those giants can develop andturnAI innovation into steady profits.

Do you believe that Alphabet’s massive investment in Artificial intelligence will make fora even stronger position moving forward or do investors have reason to demand returns already?

‍#Google #GateSquare