Alphabet, the parent company of Google, has released its third-quarter financial results, surpassing analysts' expectations in both revenue and profit. As a result, the company's stock saw a 3% increase. The earnings per share (EPS) were reported at $2.12, compared to the anticipated $1.85. Revenue came in at $88.27 billion, exceeding the expected $86.3 billion.
Additional highlights from the earnings report include YouTube's advertising revenue, which reached $8.92 billion, marginally above the estimated $8.89 billion. Google Cloud's revenue stood at $11.35 billion, topping the forecasted $10.88 billion. Traffic Acquisition Costs (TAC) were $13.72 billion, slightly higher than the projected $13.53 billion.
This robust performance from Alphabet sets the tone for a significant week in tech earnings, with Meta and Microsoft scheduled to report soon, followed by Apple and Amazon. Alphabet's revenue grew by 15% year-over-year, indicating a positive trend compared to the previous year.
Internally, the quarter was marked by significant changes within Alphabet, both in its executive team and primary business segments. Nick Fox took over as head of search and ads, replacing Prabhakar Raghavan. Additionally, the team developing consumer-facing AI products, part of the Gemini application, was integrated into Google DeepMind under Demis Hassabis's leadership.
Externally, Alphabet continues to restructure its teams to stay competitive in the AI arena against new entrants like OpenAI's ChatGPT. The company is also dealing with several antitrust lawsuits related to its search and ad businesses. A U.S. federal judge has recently ruled against Google, citing illegal monopolistic practices in the search domain. This marks the first antitrust ruling against a tech company in decades.
In October, the U.S. Department of Justice proposed possible antitrust remedies, suggesting the potential breakup of some of Google's operations, particularly focusing on its Chrome, Android, and Google Play Store businesses. The DOJ also recommended curbing default agreements and revenue-sharing arrangements related to search, including Google's deals with Apple and Samsung for default search positioning. Despite the slow legal process, any business adjustments may take years to implement.
Additionally, a U.S. judge issued a permanent injunction requiring Google to offer alternative app download options on Android devices besides its Play Store. However, Google has been granted a stay on this ruling.
In August, Google announced new Android software updates and unveiled the latest Pixel smartphones, featuring the Google Gemini AI assistant. Although hardware doesn't significantly boost Google's revenue, the new Android features may enhance revenue through subscriptions to Google's Gemini AI.
