Alphabet(US:GOOGL) Guoxin Securities·2024-07-25 10:01Investment Rating - The investment rating for Alphabet Inc. (GOOGL) is "Outperform" [1][18]. Core Insights - The report highlights that Alphabet's advertising business continues to grow steadily despite macroeconomic pressures, while its cloud business shows significant acceleration driven by AI [1][3][4]. - The company has adjusted its revenue and net profit forecasts for fiscal years 2024-2026 due to anticipated macroeconomic challenges and increasing depreciation pressures from AI investments [1][2]. Financial Overview - For Q2 FY24, Alphabet reported total revenue of $84.7 billion, a year-over-year increase of 13.6% [1]. - Google Services revenue reached $73.9 billion, with an operating margin of 40%, including advertising revenue of $64.6 billion [1][6]. - Google Cloud revenue was $10.35 billion, reflecting a year-over-year growth of 28.8% [1][4]. - Operating profit margin for the quarter was 32%, up 10 percentage points year-over-year [1][5]. Business Segment Performance - Advertising revenue grew by 11% year-over-year, with Google Search advertising revenue at $48.51 billion, up 13.8% [1][6]. - YouTube advertising revenue was $8.66 billion, also showing a year-over-year increase of 13% [1][6]. - Other non-advertising revenue, including subscriptions and devices, totaled $9.3 billion, up 14.4% year-over-year [1][6]. - The cloud business achieved a significant milestone with quarterly revenue exceeding $10 billion for the first time, supported by AI and Workspace growth [1][4][5]. Profitability and Cost Management - The GAAP gross margin was reported at 58.1%, with a notable increase in operating profit margin due to cost-cutting measures [1][5]. - Capital expenditures for Q2 were $13.186 billion, a 91% increase year-over-year, indicating ongoing investment in AI infrastructure [1][5]. - The company anticipates that increasing depreciation and amortization pressures will affect future profit margins, although it expects the full-year operating profit margin to exceed that of 2023 [1][5]. Future Outlook - The company maintains an optimistic outlook for its advertising business, bolstered by AI capabilities, and plans to continue investing in AI infrastructure to enhance search experiences and advertising tools [1][2]. - Revenue forecasts for 2024-2026 have been slightly adjusted to $350.8 billion, $395.8 billion, and $438.7 billion respectively, reflecting a 1% downward revision [1][2].