Google parent Alphabet (GOOG, GOOGL) reported its fiscal second quarter earnings after the bell on Tuesday, beating analysts' estimates on the top and bottom lines, as its cloud businesses continue to pick up steam, topping the $1 billion mark for operating profit for the first time.

For the quarter, the company saw earnings per share of $1.89 on revenue of $84.7 billion. Analysts were anticipating earnings per share of $1.85 on revenue of $84.3 billion, according to data compiled by Bloomberg. That's a major jump from the same period last year when the company reported earnings per share of $1.44 on revenue of $74.6 billion.

Advertising revenue topped $64.6 billion versus analysts' expectations of $64.5 billion, and up from $58.1 billion last year.

Shares of Alphabet were flat immediately following the announcement.

Alphabet shares are up 30% year to date. Shares of rivals Microsoft (MSFT) and Amazon (AMZN) are up 18% and 22% year to date, respectively. All three companies are pouring money into building out their generative AI capabilities, spending lavishly on data centers capable of powering the AI models they offer via their cloud service platforms.

Google saw cloud revenue of $10.35 billion and operating income of $1.17 billion. That's better than analyst expectations of $10.1 billion and operating income of $982.2 million, and higher than the $8 billion in revenue and $395 million in operating income the company reported in Q2 2023.

Google still trails both Amazon and Microsoft in the cloud space, with its rivals capturing the number one and two spots, respectively. However, the segment continues to grow, and Alphabet is banking on its investments in generative AI to help power stronger revenue and customer acquisition in the future.

But when exactly AI starts to generate revenue for Google’s Cloud business, let alone its ad segment, is still up in the air.

“It is still too early to count on AI benefits as most [companies] remain in pilot mode, and material AI [revenue] is more likely a 2025-26 event,” Jefferies analyst Brent Thill wrote in a recent investor ahead of earnings note.

Google is still trying to find its footing with AI Overview, the generative AI feature that shows up at the top of Google Search results pages. In May, the company rolled out the search function, only for users to quickly discover that its answers weren’t always accurate, with now famous responses telling users to put glue in their pizza or to eat a rock every day. Google responded by pulling back some of the gen AI features.

Email Daniel Howley at [email protected]. Follow him on X at @DanielHowley.

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