Google parent Alphabet topped third-quarter earnings and revenue on Tuesday, helped by a 35% AI-driven increase in its cloud business, as well as a rise in its digital advertising revenue.
Alphabet shares, which closed up 1.8% on Tuesday, rose 4.4% in after-hours trading. Shares are up nearly 22% this year, in line with the broader market.
CEO Sundar Pichai said AI investments were “paying off” through usage and sales in its Search and Cloud businesses.
Perceived as slow to catch up with Big Tech rival Microsoft in the AI race, Google has improved its Gemini AI chatbot and made more improvements to its AI search offering. The company is continuing to spend heavily on AI.
Its new chief financial officer, Anat Ashkenazi, making her first call with analysts, said Alphabet’s capital spending in 2025 would be higher than this year.
In the third quarter, Alphabet’s equity rose 62% to $13 billion. The fourth quarter is expected to be similar, she said.
Revenue from Google’s cloud platform rose to $11.35 billion, beating analysts’ estimate of $10.86 billion.
It was the fastest pace of growth in eight quarters, thanks to enterprises doubling their cloud spending, which is key to powering artificial intelligence technologies.
“I think it was an impressive quarter because the fact that Google Cloud was able to more than offset the decline in Search speaks to both the growing importance of cloud revenue and the fact that the company continues to diversify its revenue base, ” said Bob O’Donnell. president of TECHnalysis Research.
Google has rolled out AI Summaries ads, which use generative AI to aggregate content from a variety of sources and display concise results for search queries.
Analysts said users find the company’s new AI tools more effective than before — a significant improvement from earlier this year when the feature drew heavy criticism for showing incorrect answers, including a pizza recipe that listed glue as an ingredient.
Alphabet also beat earnings expectations with earnings of $2.12 per share, compared with an average market estimate of $1.85, according to LSEG.
Digital ad sales — the largest share of Alphabet’s total revenue — rose to $65.85 billion from $59.65 billion. That includes YouTube ad sales that rose 12% to $8.92 billion but slowed from the second quarter.
Google’s dominant position in the digital ad market has helped attract marketing dollars, even as TikTok and Amazon make inroads with marketers. Quarterly results also got a boost from increased political spending ahead of the presidential election and the 2024 Paris Olympics that ended in August.
Social media company Snap, which also depends on advertising, posted good news for shareholders, topping Wall Street’s targets for quarterly revenue and user growth, sending shares up 6% in after-hours trading. of work.
Alphabet’s total revenue rose 15% to $88.27 billion in the July-September period, while analysts on average were expecting $86.30 billion, according to LSEG data.
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