On August 17, Google, a unit of Alphabet Inc. (NASDAQ:GOOGL), agreed to buy internal business data from bankrupt Spirit Airlines for $10 million, outbidding a $7.5 million offer from AI data company Mercor. The haul includes employee emails, Microsoft Teams messages, spreadsheets, calendars, and marketing and operations records, all to be stripped of customer information before the sale closes at a bankruptcy court hearing. It is a tiny deal by Alphabet's standards. But it says something about how aggressively the company is hunting for raw material to train its AI models.
Google Cloud revenue grew 82% year over year to $24.8 billion in the second quarter, accelerating from 63% growth in the first. That pace dwarfs the 43% growth Microsoft reported for Azure and the 37% growth Amazon posted for AWS over the same period. Google Cloud is still the smallest of the three in dollar terms, but its operating income more than tripled, from $2.8 billion to $8.8 billion, pushing its margin from about 21% to 36%. Its backlog reached $514 billion, roughly five years of work at the current pace, and Alphabet expects to recognize just over half of it as revenue within 24 months. CEO Sundar Pichai said nearly 90% of the Fortune 100 now use its Gemini Enterprise model, with existing customers exceeding their original commitments by more than 50%.
AI is reshaping the advertising side of the business too. Gemini is helping Alphabet find relevant ads for longer, harder-to-monetize searches, while a tool called AI Max uses AI to expand keyword matches and rewrite ad copy automatically. Management has credited AI Overviews and AI Mode with lifting search revenue by making results more relevant, all built on top of a Chrome browser with 68% global market share and a Google Search engine that holds 91%.
Alphabet's headline numbers are less impressive up close. The company reported net income of $112.2 billion on revenue of $119.8 billion in the second quarter, but $98 billion of that came from "other income," driven mainly by a $94.1 billion unrealized gain tied to its early stake in **** eX. Alphabet invested $900 million in **** eX back in 2015 for roughly 7.5% of the company, a position that ballooned in value after **** eX's June IPO priced shares at $135 and closed the quarter at $170.86. Strip that gain out and Alphabet's net income falls closer to $18 billion, which works out to a 35% year-over-year decline in earnings per share. Because the gain is unrealized, it rises and falls with **** eX's stock price and could reverse just as fast as it appeared.
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Google Cloud revenue grew 82% year over year to $24.8 billion in the second quarter, accelerating from 63% growth in the first. That pace dwarfs the 43% growth Microsoft reported for Azure and the 37% growth Amazon posted for AWS over the same period. Google Cloud is still the smallest of the three in dollar terms, but its operating income more than tripled, from $2.8 billion to $8.8 billion, pushing its margin from about 21% to 36%. Its backlog reached $514 billion, roughly five years of work at the current pace, and Alphabet expects to recognize just over half of it as revenue within 24 months. CEO Sundar Pichai said nearly 90% of the Fortune 100 now use its Gemini Enterprise model, with existing customers exceeding their original commitments by more than 50%.
AI is reshaping the advertising side of the business too. Gemini is helping Alphabet find relevant ads for longer, harder-to-monetize searches, while a tool called AI Max uses AI to expand keyword matches and rewrite ad copy automatically. Management has credited AI Overviews and AI Mode with lifting search revenue by making results more relevant, all built on top of a Chrome browser with 68% global market share and a Google Search engine that holds 91%.
Alphabet's headline numbers are less impressive up close. The company reported net income of $112.2 billion on revenue of $119.8 billion in the second quarter, but $98 billion of that came from "other income," driven mainly by a $94.1 billion unrealized gain tied to its early stake in **** eX. Alphabet invested $900 million in **** eX back in 2015 for roughly 7.5% of the company, a position that ballooned in value after **** eX's June IPO priced shares at $135 and closed the quarter at $170.86. Strip that gain out and Alphabet's net income falls closer to $18 billion, which works out to a 35% year-over-year decline in earnings per share. Because the gain is unrealized, it rises and falls with **** eX's stock price and could reverse just as fast as it appeared.
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2 months ago
