On July 23, local time, Alphabet, Google’s parent company, released its quarterly financial results as of June 30, 2024. The financial report showed that Alphabet’s total revenue in the second quarter was US$84.7 billion, a year-on-year increase of 14%, higher than analysts’ consensus forecast of US$84.2 billion. Net profit was recorded at US$23.6 billion, with earnings per share of US$1.89, higher than the expected US$1.84 per share.

On the same day, Tesla (TSLA) announced its second-quarter 2024 results after the market closed, showing mixed performance. In the second quarter, Tesla's revenue reached $25.05 billion, slightly higher than Bloomberg's forecast of $24.63 billion and slightly higher than the $24.93 billion in the same period last year. However, adjusted earnings per share came in at $0.52, missing estimates of $0.60. Non-GAAP net income was $1.8 billion.

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Google

Google's revenue and profit in 2024Q2 were slightly higher than analysts' consensus expectations.

Cloud business hits new highs: Driven by AI, cloud business revenue exceeded US$10 billion for the first time, and operating profit exceeded US$1 billion for the first time; cloud service revenue increased by nearly 29% year-on-year to US$10.3 billion. Alphabet management said on the call that this growth was partly due to strong demand for artificial intelligence infrastructure and that the company will continue to increase investment in this business. Google has been trying to capture more of the cloud market, but it still lags behind Amazon and Microsoft.

AI-powered advertising business has improved significantly: In Q2, Google announced more than 30 new AI-powered products, which increased advertisers’ profits by an average of 15%, attracting more advertisers. In the second quarter, search business was US$48.5 billion, a year-on-year increase of 14%; YouTube advertising revenue was US$8.7 billion, a year-on-year increase of 13%;

Capital expenditure (AI infrastructure construction): The company's capital expenditure in the second quarter reached US$13 billion, mainly used for AI infrastructure construction. The company expects full-year capital expenditures for each quarter to remain roughly at or above the Q1 capital expenditure level of $12 billion. Faced with the problem of overinvestment, the company stated that the risk of "underinvestment" in AI is far greater than the risk of "overinvestment";

Youtube advertising business fell short of expectations: YouTube advertising revenue was US$8.7 billion, a year-on-year increase of 13% and a month-on-month increase of 7%. Although the year-on-year and month-on-month growth is considerable, the market's expectations for YouTube after AI empowerment are higher (9 billion U.S. dollars), causing the performance to be slightly lower than expected. In addition, data shows that Youtube Q2 usage declined slightly;

Operating profit margin increased again: through restructuring and personnel optimization, while slowing down the pace of recruitment, the number of employees decreased by 2,216 in this quarter, and operating costs decreased again.

Announcing dividends again: Following the unprecedented launch of a dividend plan last quarter, we once again announced a dividend of $2 per share this quarter;

The market reaction was "big ups and downs". Alphabet's stock price rose by 2% and then fell by 1%. Then it turned up again and once rose by 3%. In the end, it still fell by more than 1.6%.

Although overall performance exceeded expectations, Wall Street was concerned about Google's earnings momentum.

Advertising revenue on the Youtube platform was lower than expected. Q2 increased 13% year-on-year to US$8.66 billion, which was lower than market expectations of US$8.95 billion. The growth rate also slowed down compared with the first quarter. This has led to a slowdown in Google’s core advertising business, its main revenue driver. The Q2 growth rate was 11.2% year-on-year, which was lower than the 13% growth rate in the previous quarter.

Secondly, Alphabet stated in the earnings call that the number of employees may increase due to the entry of fresh graduates in the third quarter, and the trend of profit expansion may be threatened by then. In addition, Alphabet President Ruth Porat also added that the company is now facing the risk of "increased depreciation expenses due to increased investment in technical infrastructure."

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Tesla

According to the financial report, Tesla’s revenue in Q2 was US$25.5 billion, a year-on-year increase of 2%. Revenue growth was driven by growth in the energy storage business, while automotive business revenue fell 7% year-on-year to $19.8 billion. In the second quarter, Tesla’s net profit was US$1.478 billion, a year-on-year decrease of 45%.

Affected by the performance, Tesla's stock price fell more than 4% in after-hours trading.

Electric vehicle business

Tesla delivered a total of 444,000 new cars in Q2, a year-on-year decrease of 4.8%. It has experienced year-on-year declines for two consecutive quarters, but it was better than market expectations of 439,300 vehicles. Tesla produced 410,831 vehicles in the second quarter, 14% less than the same period last year.

Tesla remains by far the best-selling electric car in the United States, but its market share is being diluted by a growing number of rivals, in part because its lineup of sedans and SUVs is aging and becoming less competitive. In the first half of 2024, U.S. electric vehicle sales increased 33% year-on-year, while Tesla sales fell 9.6% during the period, according to data tracked by Cox Automotive.

The market is paying attention to changes in Tesla's gross profit margin. Tesla's overall gross profit margin in the second quarter was 18%. Although it was lower than the level of nearly 30% in previous years, it was improved compared with the past three quarters.

However, the gross profit margin of Tesla's automotive business is worrying. Its gross profit margin on automobile sales in the second quarter has dropped to 13.9%, the lowest in history. In the fourth quarter of last year and the first quarter of this year, Tesla's gross profit margin on vehicle sales was 16.6% and 15.6% respectively.

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Energy storage business

With the rise of AI, the demand for electricity in the United States has begun to grow significantly, stimulating the market demand for energy infrastructure such as energy storage.

According to the latest released data, Tesla's energy storage product deployment rose to 9.4GWh in the second quarter, setting a company record and more than double its previous largest quarterly deployment, a year-on-year increase of 157%. According to market agency forecasts, Tesla's energy business will reach 100GWh in terms of energy storage deployment by 2028, which is three years ahead of the bank's previous forecast of this demand level.

As a result, energy storage has become the most promising business within Tesla to grow rapidly to make up for the difficulties encountered by the entire car sales. If Tesla can maintain the year-on-year growth rate in the second quarter, it will be able to achieve energy storage business revenue of 3 billion to 3.5 billion in each subsequent quarter, which will be a very good support for the full-year performance.

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FSD business

In addition, the last part of Tesla's revenue source is the service segment, which mainly charges autonomous driving service fees. At the earnings meeting, Musk mentioned that FSD (fully autonomous driving) will pass regulatory approval in China and Europe before the end of this year; at the same time, there is also news that Tesla is also considering licensing FSD to other Chinese automakers. Open up new revenue streams.

On the eve of this earnings release, the news that Tesla’s Robotaxi will be postponed to October 10 has been circulating on social media. With the release of the financial report, the news was finally settled.

Regarding the postponement of Robotaxi, except for the vague technical progress and regulatory factors in the financial report, Tesla did not provide any further explanation at the results meeting, nor did it disclose the latest progress of Robotaxi and what improvements the additional time buffer will bring , only saying that Robotaxi products will continue to implement the revolutionary "deconstruction" manufacturing strategy and are expected to be officially put into use as soon as the end of this year and next year at the latest.