Alphabet’s earnings crush estimates as cloud business grows

On By Littum

Google parent Alphabet ( GOOG , GOOGL ) reported fiscal third-quarter earnings after hours Tuesday that beat analysts’ estimates on the top and bottom lines as its cloud business continued to expand, fueling Big Tech earnings with a robust performance.

The search giant reported earnings per a share of $2.12 on revenue of $88.27 billion for the quarter ended Sept. 30. This represents an increase in profit and revenue from the same period last year of 37% and 15% respectively.

Analysts expected earnings per stock at $1.83 on revenue of $86.44 billion, according to data compiled by Bloomberg.

Alphabet stock rose nearly 6% in after-hours trading on Tuesday.

Advertising revenue topped $65.85 billion, beating analysts’ expectations of $65.5 billion and up from $59.65 billion a year ago.

Google CEO Sundar Pichai highlighted the growth of the cloud unit in an earnings call on Tuesday, noting that the company’s AI portfolio is attracting new customers and leading to bigger deals. Cloud revenue reached $11.4 billion, up 35% year-over-year and exceeding expectations.

“This business has real momentum and the overall opportunity is increasing as customers embrace gen AI,” he said.

The increase in cloud revenue comes as rivals Microsoft ( MSFT ) and Amazon ( AMZN ) are also expected to grow their cloud businesses and increase investment in AI infrastructure.

Google is also facing competition on its home turf with the introduction of increasingly sophisticated AI-powered chatbots. On Monday the reported information that Meta (META) is developing its own search engine to power its Meta AI chatbot that provides users with conversational answers to their questions and prompts.

How the next generation of answer engines competes with Google’s traditional and AI-boosted search remains a key question for the company.

Pichai framed the expansion of AI search tools as boosting the user experience. AI Overviews, Google’s search feature that offers concise answers to user queries, now reaches 1 billion users on a monthly basis, the company announced Monday.

“People are asking longer and more complex questions and exploring a wider range of sites,” Pichai said. “What’s particularly exciting is that this growth actually increases over time as people learn that Google can answer more of their questions.”

Similar to legacy search results, users are served ads that Google places alongside AI listings.

Google is the first of the major tech platforms to report this week, with Meta and Microsoft set to announce quarterly results on Wednesday, followed by Amazon ( AMZN ) and Apple ( AAPL ). While all the megacaps have delivered share price gains so far this year, stocks have diverged as investors no longer measure their AI spending and the success of their businesses in lockstep.