Dive Brief:
- Google parent Alphabet expects to deliver operating margin expansion for the full year of fiscal 2024 compared with 2023, but the third quarter could be negatively impacted by depreciation and higher expenses, partly due to artificial intelligence investments, departing CFO Ruth Porat told investors Tuesday.
- The tech giant’s capital expenditures in the second quarter totaled $13 billion, and its spending for the rest of 2024 is expected to reach about $12 billion quarterly, Porat said during her final earnings call as Alphabet’s finance chief.
- “The primary driver of this, as you know well, is to support the opportunities we see in AI across the company,” she said.
Dive Insight:
Alphabet is one of a number of big tech companies that are locked in a race for AI dominance, while also facing growing pressure from investors to show that investments in this area are paying off.
Alphabet’s revenues rose to $85 billion during the second quarter, an increase of 14% year over year, according to results released Tuesday. Google Cloud revenue jumped to $10.35 billion during the quarter, a 28% spike from a year earlier.
“Year-to-date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers,” Alphabet CEO Sundar Pichai said during the Tuesday call.
Despite posting strong revenue growth, Alphabet saw its shares drop on Wednesday, likely driven in part by Wall Street angst over Porat’s operating margin and capital expenditure comments, according to Reuters.
Porat announced last year that she was stepping down from Alphabet’s top finance post and transitioning into a newly created dual role of president and chief investment officer at the tech behemoth. She took the company’s finance reins in May 2015, making her its longest-serving CFO.
“I think we have accomplished a lot in the last nine-plus years, and I am confident that progress will continue,” Porat told investors Tuesday.
Last month, the company said that Eli Lilly veteran Anat Ashkenazi will become its new CFO, effective July 31. In her new role, Ashkenazi is expected to receive an annual base salary of $1 million and a one-time sign-on bonus of $9.9 million.
