Q2 Results Show Fears About Alphabet Are Overblown

Earlier this year, there were indications that investor sentiment might have turned against Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG). The increased attention on artificial intelligence (AI) led some to fear that users would no longer need Google's search engine and would likely see less of its advertising. Ads, which once constituted almost all its revenue, remain very important to Alphabet's top line.

In July, the latest earnings report showed the company's income growth has begun to recover. The bulls are saying that AI competition fears are overblown and Alphabet will do just fine. I'm inclined to side with the bulls here. Considering its vast resources, one can make a solid argument why the Google parent remains a buy for most investors. Here's that argument.

Admittedly, Alphabet's revenue has slowed considerably from the rapid growth of the past. The company's $75 billion in Q2 2023 revenue grew by only 7% compared to 2022's second quarter. Still, contrary to all the concerns about advertising, Google search revenue rose, and overall, ad revenue grew by 3% year over year. And even though the $58 billion in ad revenue still makes up 78% of Alphabet's overall revenue, the company continues to diversify its revenue sources. To that end, the $8 billion generated by Google Cloud grew to account for 11% of the company's revenue, and that segment of the business rose 28% compared to year-ago levels.

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Source Fool.com