Alphabet, the parent company of Google, experienced a significant drop in its share price, falling over 3% in pre-market trading on Wednesday. This decline came despite the company exceeding second-quarter earnings expectations. The primary driver of this downturn was investor concern about Alphabet’s escalating expenses, particularly the substantial investments being made in artificial intelligence (AI) and infrastructure.
During the quarter, Alphabet reported a staggering $13 billion in capital expenditures. The company has further plans for investments at or above $12 billion for the remainder of 2024. These substantial investments, significantly exceeding the already large expenditures from the first quarter, have raised concerns among investors regarding the company’s cost management strategies.
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While Alphabet’s core advertising revenue demonstrated strong growth, surging 11% to $64.6 billion, driven by events like the Olympics and elections, YouTube revenue, though growing 13% to $8.67 billion, fell short of Wall Street estimates. This shortfall could be attributed to increasing competition from connected TVs and long-form video platforms.
Despite these concerns, several brokerages have raised their price targets for Alphabet’s stock. They cite the company’s dominant position in search and its continued investments in AI, which they believe will enable it to effectively compete with rivals like OpenAI and Microsoft.