- The June-quarter earnings from Alphabet, Microsoft, Snap, and Spotify do not indicate a strong state of business in the tech industry.
- Alphabet had the best quarter among the companies reporting, with revenue growth accelerating to 7% from 3% in the first quarter.
- Alphabet's CFO, Ruth Porat, will transition to a new role as president and chief investment officer while retaining the finance role until a successor is found.
- Porat's new position involves dealing with policymakers and regulators, which is crucial for Google as it faces antitrust lawsuits.
- Keeping Porat around is seen as a relief for investors, considering the criticism of CEO Sundar Pichai's effectiveness.
Main financial assets discussed in the article:
1. Alphabet Inc. (NASDAQ: GOOG) (NASDAQ: GOOGL) stock
2. Google Cloud segment
3. YouTube division
Top 3 key points:
1. Alphabet reported strong revenue growth in Q2 2023, driven by its Search and Cloud services. Google Search and advertising revenues reached $66.3 billion, while Google Cloud segment revenues reached $8 billion.
2. Alphabet showcased significant progress in AI development, with advancements in large language models and the incorporation of AI into various products. The company unveiled the Search Generative Experience (SGE) and leveraged generative AI in advertising and user creativity.
3. YouTube experienced significant growth, with revenues reaching almost $40 billion in the 12 months ending in March. The platform saw increased user engagement, particularly on connected TV screens, and introduced new ad offerings for Shorts and Connected TV.
Recommended actions: **Buy** Alphabet Inc. (GOOG, GOOGL) stock. The article highlights the company's strong revenue growth, progress in AI development, and success in the Google Cloud and YouTube divisions. These factors suggest a positive outlook for Alphabet's stock.
### Summary
Alphabet is generating substantial revenue and cash flow, which makes the case for the company to begin paying a dividend. Its strong operating history and opportunities in the field of artificial intelligence (AI) provide the foundation for this move.
### Facts
- Alphabet recorded revenue of nearly $75 billion in the second quarter, resulting in net income of more than $18 billion.
- The company generated nearly $29 billion in operating cash and $22 billion in free cash flow during the quarter.
- Alphabet has a total cash and marketable securities on its balance sheet of over $118 billion.
- The company is well positioned to benefit from advancements in generative AI and is making efforts to make it available via its Google Cloud platform.
- Alphabet has added new AI tools to its product portfolio, including the Bard chatbot.
- Paying a dividend is a way for companies to return capital to shareholders when the amount of cash is more than it can use to generate additional growth.
- Apple's example shows that paying a dividend does not mean stalling growth, as it has increased its payouts by 154% while its stock increased by 729%.
- Alphabet could potentially pay a dividend by using a portion of its profits, such as 16% or 25%, resulting in a yield of about 0.5% or 1% respectively.
- Alphabet has not paid a dividend to date, but management has not ruled out the possibility in the future.
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