We begin with Neil’s thoughts on Alphabet’s earnings. The discussion includes commentary on Alphabet/Google CFO Ruth Porat transitioning to a new role at the company. We conclude with Neil’s updated Apple earnings model and how the model has changed over the past three months. Access to Neil’s Apple earnings model is a benefit associated with Above Avalon membership at no additional cost.

Hello everyone.

In keeping with our usual practice, tomorrow’s update (Thursday) will be pushed back a day so that we have a special Friday edition of the update to review Apple’s earnings. Apple will release earnings Thursday at 4:30 pm ET.

For today, we will focus on Alphabet’s earnings.

Alphabet 2Q23 Earnings

Alphabet reported a solid quarter as delays in some expenses and investments helped to boost CY2Q23 profitability.

Revenue was up 7% (up 9% excluding FX) with gross margins up 140 basis points year over year. Operating income was up 12%. Free cash flow was $22B.

While much of Alphabet’s earnings call was dedicated to AI, the more tangible takeaway was continued stabilization in the digital ads market. Like Meta, Google saw additional improvement in its core ads business. As macro issues subside, the purveyors over the most valuable pieces of digital real estate are positioned to see a return to ad revenue growth.

There is an asterisk found with the preceding statement.

An Above Avalon membership is required to continue reading this update. Members can read the full update here. An audio version of this update is available to members who have the podcast add-on attached to their membership. More information about the podcast add-on is found here.

(Members: Daily Updates are always accessible by logging into Slack. If you haven’t logged into Slack before, fill out this form to receive an invite.)

Above Avalon Membership

Subscribe $20/month

Subscribe $200/year

Payment is processed and secured by Stripe. Apple Pay and other mobile payment options are accepted. Special Inside Orchard bundle pricing is available for Above Avalon members.

More information about Above Avalon membership, including the full list of benefits and privileges, is available here.