On Tuesday, Alphabet said that its second-quarter profit had above Wall Street estimates and that Ruth Porat, the company’s longtime CFO, would take on a new job while it searched for a new finance head.

The consistent demand for Alphabet’s cloud services and an uptick in advertising contributed to its success. After-hours trading saw an 8% increase in the shares. Shares of rival Microsoft, which released results on Tuesday as well, were marginally lower, while shares of Meta Platforms, a business that is similarly heavily dependent on ad sales, increased by as much as 2%.

“Not only did Google deliver fantastic earnings per share, exceeding expectations at a time when investors were questioning its ability to keep up with other tech giants amid the AI frenzy, it also did so by a considerable margin,” said Thomas Monteiro, senior analyst at Investing.com. “This strongly indicates that a new growth phase for the giant is likely under way.”

He added, “Google has finally consolidated itself as a leading force in the highly-disputed cloud sector and now has room to focus its expansion in the AI field.”

One of Silicon Valley’s most well-known female leaders, Porat was appointed in 2015 and managed enormous development at Alphabet. Beginning on September 1, she will take over as president and chief investment officer and oversee 2024 preparations till a replacement is found.

Porat was employed after serving as finance head at Morgan Stanley. She will lead the unit for the company’s riskier hardware and services projects, known as Other Bets, in her new position. She will also assist in managing the company’s international investments.

Advertisers, who account for a sizable portion of Alphabet’s earnings, have decreased their expenditure on unproven platforms, benefiting both the parent company of Google and Facebook owner Meta Platforms.

However, investors worried about a larger advertiser slowdown after the spectacular expansion of Web services during the epidemic would be pleasantly surprised by Alphabet’s second-quarter earnings as customers switched back to physical shops.

Software with generative artificial intelligence, which can provide in-depth answers to user inquiries and is expected to be the next big step for Big Tech, has been the talk of Silicon Valley. At its annual I/O developer conference in May, Alphabet unveiled AI products and updated its search engine using generative AI.

The new AI technology is expensive; according to Porat in a conference call, servers and a “meaningful investment” in AI computing made up the majority of Alphabet’s capital expenditures in the second quarter.

The company’s overhauled search will soon feature advertising, CEO Sundar Pichai announced on the conference call with investors. Alphabet is experimenting with the best ad formats and placement options for its AI-powered search.

80% of advertisers currently utilise at least one AI-driven search engine, according to Chief Business Officer Philipp Schindler.

The business intends to incorporate generative AI into a variety of other products, including its Android mobile operating system, Gmail, and Google Photos. Text, photos, and videos produced using generative AI technology can resemble human-produced content.

However, the data revealed on Tuesday demonstrates that advertising revenues remain dominant. Investors penalised social media giant Snap on Tuesday as a result of its underwhelming third-quarter ad sales.

One of the largest cloud service providers, Google Cloud, had a 28% increase in revenue to $8.1 billion, above estimates of $7.75 billion and keeping growth at a similar pace to the first quarter. Microsoft’s Azure revenue increased 26%, above Visible Alpha’s growth forecast.

Cloud company growth is anticipated to rise up towards the end of the year, with the quarter ending in June serving as the trough as macrouncertainty starts to subside.

Within a year, investors anticipate AI to become a significant growth driver for cloud businesses, with Google Cloud and Amazon.com’s AWS and Microsoft’s Azure leading the way.

Google’s YouTube video service division had an increase in ad sales of 4.4% to $7.67 billion.

In comparison to projections of $1.34 per share, Alphabet’s net earnings for the months of April through June came in at $1.44 per share.

Refinitiv figures show that revenue for the quarter came in at $74.6 billion as opposed to projections of $72.82 billion.

(Adapted from StreetInsider.com)