Google’s business does not suffer from AI competition – on the contrary

Google. © Mitchell Luo auf Unsplash
Google. © Mitchell Luo on Unsplash
Startup Interviewer: Gib uns dein erstes AI Interview Startup Interviewer: Gib uns dein erstes AI Interview

With sales of $80.5 billion (+15% YoY) and a profit of a whopping $23.7 billion (+36%), it is still clear: Alphabet with the core businesses of Google Search, YouTube, and, increasingly, the cloud furthermore an unparalleled money printing machine. In the last financial quarter, analysts’ expectations were clearly beaten, and the good figures caused the share price to jump by a whopping 12 percent after trading.

Google Search with its advertising business is still the largest revenue generator with $46.2 billion in the first quarter of 2024, Google Cloud with $9.6 billion is now a bigger business than YouTube, which brought in around $8 billion. Because of the strong numbers, Alphabet will also pay a dividend of 20 US cents per share for the first time on June 17th. This also caused the price to jump.

Despite all of this, it is not yet clear how and whether Google’s big AI ambitions will contribute to this growth – it has not been explicitly stated. “Our first quarter results reflect the strong performance of Search, YouTube, and Cloud. We are well underway with our Gemini era and there is great momentum across the company. Our leadership in AI research and infrastructure, as well as our global product presence, position us well for the next wave of AI innovation,” CEO Sundar Pichai said in a statement to investors.

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ChatGPT and Microsoft challenged Google

This means that the idea that Google would suffer from the rise of ChatGPT and Co. is now off the table – advertisements in Google search and on YouTube are still real money pits, and the cloud services are also very popular. With Gemini, the company has finally – with many setbacks – placed a suitable ChatGPT competitor on the market, which can now be marketed and bundled with other products. Google will still have to prove whether this will have an impact on sales.

What is also certain is that the AI ​​expansion also costs a lot. Google spent $12 billion on capital expenditures in the first quarter, up 91 percent, almost doubling the previous year. According to CFO Ruth Porat, spending on servers and data centers has been increased to use artificial intelligence throughout the company. The company also said it spent $11.9 billion on research and development in the first three months of this year, up 4 percent.

Although it is not clear whether AI products contribute directly to sales growth, it is also clear that the company has integrated AI features across its product range and cut around 10,000 employees in the previous year. It can be assumed that artificial intelligence is already increasing certain efficiencies. In addition, AI features will soon be much more visible in the main product, namely the search engine.

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