Google Q2 - Search dominates

Google reported earnings on Tuesday evening which pleased the market. The share price closed up a handsome 5.8% on Wednesday. Revenues came in better than expected, especially from YouTube and Search. Their Cloud business is also showing good form, growing 27% to $8 billion in sales for the quarter.

This business is in great shape. EBIT margins grew 1.4% in the quarter to 29.3% after they restructured their personnel (fired some people). So far this year they have bought back a whopping $29.5 billion worth of shares. As a long term shareholder, this means that every year you own more of the company without doing a thing.

Good advertising revenue on YouTube and Search is a sign the US economy is thriving. Companies tend to cut back on advertising spend when times are tough. Advertising online is very effective.

Of course, the AI theme came through strongly in the results commentary. At least 80% of Google ads now use an AI tool to enhance the experience for both the advertiser and the consumer targeted. 70% of generative AI unicorns are Google Cloud customers.

Rock star CFO Ruth Porat (pictured below) will change roles at the end of this year to Chief Investment Officer, that should be interesting.

We rate Google a strong buy at these levels. It only trades at 15 times expected earnings in 2025 and continues to show solid growth within their portfolio of products.