Alphabet (GOOGL, Financial), Google's parent company, announced its third-quarter financial results, surpassing analyst expectations with a significant boost from AI-driven cloud business and digital advertising. Revenue, excluding partner payments, rose to $74.6 billion, outperforming the expected $72.9 billion. Adjusted earnings per share reached $2.12, exceeding the forecasted $1.84. Alphabet's total revenue increased by 15% to $88.27 billion, beating the anticipated $86.3 billion.
The digital advertising sector, a major contributor to Alphabet's revenue, saw sales rising from $59.65 billion to $65.85 billion. YouTube's ad revenue grew by 12% to $8.92 billion, slightly higher than the $8.89 billion expectations but showed a slowdown from the previous quarter. Google's search business generated $49.4 billion, showing a 12.3% year-over-year increase according to the CFO Anat Ashkenazi.
With its core search business maturing, Google is focusing on expanding its cloud computing division, leveraging its AI expertise to attract more clients. The cloud business grew by 35%, driven by the rising demand for AI development and adoption. Sales soared to $11.4 billion, surpassing the expected $10.8 billion. Google's cloud efforts, bolstered by AI, are helping to mitigate the decline in search business performance and diversify its revenue sources.
Alphabet continues to invest heavily in AI, enhancing its Gemini AI chatbot and its search services. CEO Sundar Pichai highlighted the company's progress in reducing costs and doubling the scale of its generative AI models. Additionally, Alphabet is investing in new energy technologies to support the future demand from AI advancements.
In other ventures, Alphabet's "Other Bets" unit, which includes Waymo and Verily, reported revenue of $388 million, up from $297 million the previous year. Despite a loss of $1.1 billion, efforts are ongoing to reduce this deficit. Former CFO Ruth Porat, now President and Chief Investment Officer, is expected to increase oversight over these ventures.
The report arrives amidst evaluations by the U.S. government concerning Alphabet's potential antitrust issues in search and digital advertising. Despite regulatory challenges, Alphabet's advertising business shows resilience, as noted by digital ad analyst Evelyn Mitchell-Wolf.
