Alphabet (GOOGL) delivered disappointing results for Q2 2022, which ended on June 30, 2022. The tech giant delivered weaker-than-expected earnings and revenues.
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GOOGL shares closed 2.32% lower at $105.02. However, it rose more than 4% in extended trading hours following the Q2 results.
Revenues and Earnings Miss Estimates
Revenue in the quarter was up 13% to $69.69 billion from the year-ago quarter. However, the figure missed consensus estimates of $70.04 billion. Google search and other revenue came in at $40.69 billion, up from $35.85 billion in the year-ago quarter. YouTube ads revenue increased marginally to $7.34 billion from $7.0 billion in the year-ago quarter. Meanwhile, Google Cloud revenue increased to $6.28 billion from $4.63 billion in the year-ago quarter.
Diluted earnings per share (EPS) declined to $1.21 from $1.36 in the year-ago quarter. Alphabet missed expected earnings of $1.28 a share.
Other Operating Metrics
Meanwhile, operating income increased marginally to $19.45 billion from $19.36 billion in the year-ago quarter. However, the operating margin declined to 28% from 31% in the year-ago quarter. Net income landed at $16.0 billion, down from $18.53 billion in the year-ago quarter.
Total Traffic Acquisition Costs (TAC) increased to $12.21 billion from $10.93 billion in the year-ago quarter. Alphabet exited the quarter with an employee count of 174,014, an increase from 144,056 in the year-ago quarter.
Alphabet’s Stock Split
Alphabet executed a 20-for-one stock split on July 15, 2022, in the form of a one-time special stock dividend on Class a, Class B, and Class C stock.
Management’s Commentary
In defense of the results, Chief Executive Officer (CEO) Sundar Pichai touted that consistent investment is needed to support long-term growth. He said, “In the second quarter our performance was driven by Search and Cloud. The investments we’ve made over the years in AI and computing are helping to make our services particularly valuable for consumers, and highly effective for businesses of all sizes. As we sharpen our focus, we’ll continue to invest responsibly in deep computer science for the long-term.”
Wall Street’s Bullish Take on Alphabet
The Street is bullish about the stock, with a Strong Buy consensus rating, based on 24 Buys and two Holds. The average Alphabet price target of $144.45 implies 37.55% upside potential from current levels.
Website Traffic Shows Mixed Trends
TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Alphabet’s performance this quarter.
According to the tool, the Alphabet website recorded a 1.34% monthly decline in global visits to 5.69 billion in June 2022 compared to the previous month of May. However, year-to-date, Alphabet website traffic increased by 12.56%, compared to the same period last year.
Learn how Website Traffic can help you research your favorite stocks.
Key Takeaway for Investors
The weakening revenue growth rate and a decline in Alphabet’s EPS should be a point of concern. In addition, investors should be wary of a spike in TAC even as management insists on investments to support long-term growth.
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