Alphabet’s CFO Gets A Promotion To President After Q2 Earnings Top The Forecasts
Key takeaways
- Alphabet’s CFO, Ruth Porat, is moving to a joint president and chief investment officer position in the company
- The announcement was made on Alphabet’s Q2 earnings call, which unveiled better-than-expected performance across the board
- Google’s share price was up 5.8% at the double-header of good news
One of Google’s top executives has just gotten a double promotion. CFO Ruth Porat will be taking on two new titles: president and CIO for the Big Tech titan, which has had a successful run so far in 2023 on delivering generative AI products to consumers.
Porat will be responsible for Alphabet’s speculative portfolio. Wall Street is overjoyed at the move, especially as the announcement came alongside a positive Q2 earnings beat for Google. Here’s the latest on big moves and big money at Google.
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What’s happening with Alphabet’s CFO?
Alphabet CFO Ruth Porat is taking a step in a new direction: she’s moving on to the newly created role of president and chief investment officer at Google and Alphabet. Porat will take on the new role in September while remaining in charge of next year’s and longer-term planning as CFO while the company looks for a successor.
Having joined Google in 2015 from Morgan Stanley as chief finance officer, Porat has a gleaming history at the company. She’s credited with transforming Alphabet’s cost structure, focusing on AI investments and also overhauling Alphabet’s finance operations with cloud computing and automation.
Alphabet CEO Sundar Pichai said on the Q2 earnings call he was looking forward to seeing Porat’s impact on “driving our investments, engaging with our stakeholders, and creating opportunities for people and communities everywhere”.
“I’m excited about this new role and the opportunity to engage with leaders globally to unlock economic growth via technology and investment,” Porat said in a statement.
Porat’s new remit at Alphabet
As chief investment officer, Porat told CNBC her focus would be on investments across the board, including infrastructure, real estate and data centers, among others. Porat will also oversee the Other Bets portfolio, which includes Alphabet’s ‘throw it at the wall and see what sticks’ ventures. Think self-driving cars, drones and biotech.
Historically, it’s not performed well: recent examples include self-driving car company Waymo reporting an $813 million operating loss in the second quarter, and in total, the segment has cost Alphabet around $30 billion in operating losses.
Alphabet has tried to stem the bleeding – earlier this year, it announced that the life sciences company Verily and robotics and AI start-up Intrinsic were laying off a combined 280 roles in the businesses.
Another critical responsibility of the new position will be overseeing how Alphabet invests its money. The parent company has already made significant structural changes, including merging DeepMind and Google Brain into one entity, as well as reconsidering the development of future tech such as AR glasses.
What were Alphabet’s Q2 earnings like?
Google’s earnings beat this week has been a bright spark in a sea of so-so reports. The search engine giant reported a net profit of $1.44 a share, smashing the $1.34 target analysts had set. Revenue for the second quarter reached $74.6 billion, surpassing expectations of $72.82 billion.
Google Cloud, the third-largest cloud computing provider, saw its revenue increase by 28% to $8.1 billion, beating forecasts of $7.75 billion. The division also saw a record operating income of $395 million, a massive turnaround from a $590 million loss in the second quarter of 2022.
Advertising revenue has been another tough spot for Big Tech as businesses pulled back on spending, but ad sales for YouTube were up 4% in the quarter to hit $7.67 billion. Google Search’s revenue climbed 4.8% to $42.4 billion, but Google Network revenue fell 5% to $7.85 billion due to a slowdown in digital ads spending.
One interesting point made on Google’s earnings call was that the most significant expense for the quarter was “a meaningful increase in our investments in AI compute”, such as servers and data centers. AI is the future, but being a trailblazer is an expensive path to tread.
Wall Street’s reaction
Porat has a solid history at Google, having been the company’s longest-serving CFO and transforming the finance operations of the business as it transitioned into becoming Alphabet. Wall Street investors are a big fan, so traders consider any broadening of Porat’s remit a good move.
As for the earnings beat, Google had been under recent pressure as analysts questioned whether the Big Tech behemoth was moving quickly enough in the AI wars (Microsoft
MSFT
The combination of the two announcements lit a fire under the share price. Shares were up 6.4% in premarket trading on Wednesday, closing the day 5.78% up. The boost brings Google’s total stock gains this year to 45%, far exceeding the Nasdaq Composite‘s already excellent 36% return in the same period.
In comparison, Microsoft’s shares have fallen 3.76% this week after its earnings beat delivered above estimates for revenue and profits but failed to top expectations for the third-quarter guidance. Meta enjoyed a 6% boost to its share price after trumping revenue and earnings per share estimates and crossing the 3 billion mark for active daily users across its platforms for the first time.
The bottom line
Porat’s new role is an exciting new move for the company and clarifies that Alphabet is looking to enter a new AI-fuelled growth phase. This is confirmed by the second-quarter earnings beat, which reflected an improving economic landscape and reassured investors that Google’s big bet on AI isn’t just for show.
Google’s next stage will undoubtedly be getting past the upfront investment needed to get generative AI started so it can make the buzzy new tech a profitable mainstay for the Big Tech giant. But it won’t necessarily be plain sailing for Porat, considering Alphabet’s heavy financial losses with the Other Bets portfolio. Wall Street will look for a turnaround in the division – and fast.
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