Alphabet (GOOGL, Financial), Google's parent company, reported its third-quarter financials, showing impressive growth driven by AI-enhanced cloud services and increased digital ad revenue. The company's sales exceeded analyst expectations, with revenue rising 15% to $88.27 billion, surpassing the forecast of $86.3 billion. Excluding partner payments, revenues increased to $74.6 billion, beating the expected $72.9 billion. Adjusted earnings per share reached $2.12, higher than the anticipated $1.84.
Digital advertising, particularly through Google's search business, remains a significant revenue driver. The company reported $65.85 billion from ad sales, up from $59.65 billion, with YouTube ads contributing $8.92 billion, a 12% increase from the previous year. This growth was influenced by political spending ahead of the U.S. presidential election and the 2024 Paris Olympics.
Alphabet's cloud segment demonstrated strong performance, with a 35% revenue jump to $11.4 billion, surpassing the expected $10.8 billion. The company is leveraging its AI capabilities to attract more cloud computing clients, aiming to outperform competitors like Amazon and Microsoft (MSFT). The rapid expansion includes partnerships with AI startups, many founded by former Google employees.
Alphabet's investment in AI continues to pay off, with advancements in AI chatbot Gemini and AI search services contributing to growth. The company has significantly cut costs for AI solutions in the past 18 months, boosting efficiency and maintaining its market position despite regulatory challenges. Alphabet's cloud strategy is also supported by new power sources, including nuclear energy, to accommodate future AI demands.
The "Other Bets" segment, comprising ventures like Waymo and Verily, reported $388 million in revenue, up from $297 million the previous year, though still operating at a loss. Capital expenditures grew by 62% to $13 billion, signaling continued investment in diverse business areas.
Despite its achievements, Alphabet faces antitrust scrutiny from the U.S. government, particularly concerning its search and digital advertising dominance. The company remains vigilant against regulatory impacts on its tech leadership.
