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Google parent Alphabet’s shares spike on Q2 print

 

Wednesday, July 26, 2023

Today’s headlines

What’s happening: Shares of Alphabet gained in after-hours trading on Tuesday, following the release of second-quarter results.

What happened: Google’s parent company reported stronger-than-expected profits for the second quarter amid a rebound in advertising.

Alphabet also reported a management change, promoting its current CFO to the newly created role.

How were the results: The Mountain View, California-based company reported single-digit growth in sales for the April to June period.

  • Revenues rose 7% year-over-year to $74.604 billion, beating the consensus estimates of $65.42 billion.
  • Earnings climbed 19% year-over-year to $1.44 per share, topping Wall Street expectations of $1.20 per share.

Why it matters: Several big tech companies are investing heavily into artificial intelligence. Alphabet had announced AI products at its annual I/O developer conference in May. The company also said it was revamping the Google search engine to include AI.

Alphabet is looking to integrate generative AI into the company’s other products, including Gmail and Google Photos. However, the company’s advertisement business remains among the top contributors to its overall results.

Its search revenues rose 4.8% to $42.628 billion, while revenues from Google Cloud jumped 28% to $8.1 billion. YouTube ad revenues climbed 4.4% to $7.665 billion, while Google’s ad revenues rose 3% to $58.14 billion in the second quarter.

Google also bought back $14.97 billion of its own stock in the latest quarter.

CFO Ruth Porat will be assuming the newly created role of President and CIO, effective September 1. Porat will continue as CFO till the company finds her successor. In her new role, Ruth will be responsible for Alphabet’s investments in its Other Bets portfolio as well as the company’s “investments in countries and communities around the world,” Google said.

How shares responded: Alphabet’s shares rose 6.1% to close at $129.63 in extended trading on Tuesday, following the release of quarterly earnings. The stock has added around 25% over the past six months.

What to watch: Investors will watch the company’s launch of AI products and the addition of this new-age tech into its existing.

The markets today

European stocks will be in focus today ahead of a basket of economic reports

Context: European stocks settled mostly higher on Tuesday amid an increase in mining stocks on hopes of higher demand from China.

Details: European equities moved higher and mining stocks recorded their best session in more than eight months on Tuesday, following the Chinese government’s commitment to step up support for the country’s slowing economy.

However, overall market sentiment remained cautious ahead of monetary policy decisions by the US Federal Reserve and European Central Bank this week. The Fed will announce its policy decision today and markets widely expect a rate hike of 25 basis point.

Markets are closely watching the earnings season. Unilever’s stock gained around 4.7% on Tuesday after the company reported better-than-expected underlying sales growth. Shares of Adidas rose 3.8% on its upbeat guidance.

Consensus estimates indicate profits at STOXX 600 firms to have shrunk by 8.1% in the second quarter.

On the economic data front, Germany’s Ifo Business Climate indicator declined for the third straight month to a reading of 87.3 in July. This was the weakest level since November 2022.

The STOXX Europe 600 Index rose 0.48% to settle at 467.92 on Tuesday, recording gains for the sixth consecutive session. Mining stocks added around 4.2%, leading the gains.

London’s FTSE 100 rose 0.17% to close at 7,691.80, reaching its strongest level in two months. Germany’s DAX 40 added 0.13% to 16,211.59, while France’s CAC 40 slipped 0.16% to settle at 7,415.45.

What are expectations: Traders await economic reports on household credit growth, loans to non-financial corporations and money supply M3 from the Eurozone today. The value of loans in the Eurozone, which rose 2.1% year-over-year in May, is expected to increase 1.7% in June.

Analysts expect bank lending to companies in the Eurozone to rise by 3.6% year-over-year in June, following a 4% increase in the previous month. M3 money supply in the bloc had expanded by 1.4% year-over-year to €16.02 trillion in May and is expected to rise further, by 1.1%, in June.

Other Markets: US trading indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and the Nasdaq 100 up by 0.08%, 0.28% and 0.73%, respectively.

The news shaping the markets

Although Kyiv faced its sixth air attack by Russia this month, all drones were destroyed before any major damage. The news sent the safe-haven US dollar index higher this morning.


Australia’s annual inflation rate fell to 6.0% in the second quarter, from 7.0% in the prior quarter. The figure was also better than market expectations of 6.2%, which lent support to the AUD/USD forex pair.


The API said US crude stockpiles had risen by 1.319 million barrels in the week ended July 21, following a decline of 0.797 million barrels in the prior week, which sent the WTI crude oil futures lower this morning.


Argentina’s retail sales surged 148.8% year-over-year in May, following 147.8% growth in the prior month and lent support to the ARS/USD forex pair.


US S&P CoreLogic Case-Shiller home price index declined 1.7% year-over-year in May. This being better than the market estimates of a 2.2% decline sent the Nasdaq 100 index higher by more than 100 points on Tuesday.

What else to watch today

France’s consumer confidence, initial jobless claims and unemployed persons, US MBA mortgage applications, new home sales, crude oil inventories, gasoline stocks change, distillate inventories and building permits, Brazil’s current account and foreign direct investment, India’s money supply M3, as well as Russia’s industrial production and corporate profits.


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