Google parent company Alphabet (GOOG, GOOGL) released its fiscal second quarter earnings on Tuesday, surpassing analysts' expectations in both revenue and profit. The company's cloud businesses performed exceptionally well, crossing the $1 billion mark for operating profit for the first time. In Q2, Alphabet reported earnings per share of $1. 89 on revenue of $84. 7 billion, exceeding analysts' estimates of $1. 85 per share on revenue of $84. 3 billion. This represents a significant increase of 31% and 14% respectively compared to the same period last year, when earnings per share were $1. 44 on revenue of $74. 6 billion. Advertising revenue reached $64. 6 billion, surpassing analysts' projected $64. 5 billion and showing growth from $58. 1 billion in the previous year. However, YouTube ad revenue fell short at $8. 66 billion compared to the expected $8. 95 billion. Shares of Alphabet remained unchanged after the announcement. Google's cloud revenue reached $10. 35 billion with an operating income of $1. 17 billion, outperforming analyst projections of $10. 1 billion and $982. 2 million respectively. This is an improvement from the $8 billion in revenue and $395 million in operating income reported in Q2 2023. Year to date, Alphabet shares have increased by 30%. Rivals Microsoft (MSFT) and Amazon (AMZN) have seen growth of 18% and 22% respectively. All three companies are heavily investing in developing their generative AI capabilities and expanding their data center infrastructure to support their cloud services. Alphabet invested $2. 2 billion in building AI models across its DeepMind and Google Research organizations during the second quarter.

This expenditure has doubled since Q2 2023. It remains uncertain when AI will start generating revenue for Google's Cloud business and advertising segment. According to Jefferies analyst Brent Thill, widespread AI benefits are not expected until 2025-26 as most companies are still in the pilot phase. These projections were made before Alphabet's earnings announcement. Google is still refining its generative AI feature, AI Overview, which appears at the top of Google Search results. Although the feature was launched in May, users quickly noted that its answers were not always accurate. Some responses even suggested putting glue on pizza or eating a rock daily. Google has since made adjustments to these generative AI features. While investing in AI, Alphabet has reduced its headcount, reporting 179, 582 employees in Q2, down from 181, 798 in the same period last year. To stay updated with the latest tech news, subscribe to the Yahoo Finance Tech newsletter. For more in-depth coverage on earnings, whispers, and company news, visit the Yahoo Finance website.