Google’s parent company Alphabet Inc. stunned Wall Street with its impressive third-quarter earnings report, surpassing expectations on both revenue and profit. The tech giant’s shares skyrocketed by 6% in after-hours trading.
Alphabet reported earnings per share of $2.12, beating estimates of $1.85, while revenue reached $88.27 billion, exceeding forecasts of $86.30 billion. YouTube advertising revenue came in at $8.92 billion, slightly above predictions. Google Cloud revenue surged 35% year-over-year to $11.35 billion, while traffic acquisition costs (TAC) reached $13.72 billion.
The company’s cloud business shone bright, driven by artificial intelligence (AI) offerings, particularly subscriptions for enterprise customers. Alphabet’s CEO Sundar Pichai attributed this success to Google’s “full stack” of AI products operating at scale.
Google’s search segment generated $49.4 billion in revenue, up 12.3% year-over-year. This robust performance solidifies search as the largest contributor to Alphabet’s revenue growth, according to Chief Financial Officer Anat Ashkenazi.
Alphabet’s net income jumped to $26.3 billion, or $2.12 per share, compared to $19.7 billion, or $1.55 per share, in the same quarter last year. This impressive earnings report sets the stage for a pivotal week in tech, with Meta, Microsoft, Apple, and Amazon scheduled to report their quarterly results.
Alphabet’s revenue grew 15% year-over-year, outpacing the same quarter last year. Pichai opened the investor call saying the company’s AI products are now creating a “virtuous cycle” among Google’s billions of users.
This strong quarter kicks off a big week of earnings for tech’s megacap companies, with all eyes on the industry’s giants.
Alphabet Doubles Down on AI-Powered Cost Cutting
In its latest bid to optimize efficiency, Alphabet Inc. is leveraging artificial intelligence (AI) to streamline operations, manage headcount, and reduce its physical footprint. Chief Financial Officer Anat Ashkenazi revealed plans to build on existing cost-cutting efforts, exploring opportunities to accelerate growth and pivot resources towards more attractive ventures.
Ashkenazi, who joined Alphabet in June after a 23-year stint at Eli Lilly, emphasized the importance of AI-driven workflow optimization. This strategic move comes as Alphabet reported advertising revenue of $65.85 billion, up from $59.65 billion last year, indicating steady growth in Google’s advertising business.
YouTube, facing increased competition from Netflix, TikTok, and Amazon, saw ad revenue slightly exceed analysts’ expectations, thanks to AI-enhanced content recommendations. Philipp Schindler, Chief Business Officer, credited Alphabet’s AI language model Gemini for improving YouTube’s personalized content suggestions.
Google Workspace and Google Cloud Platform also posted strong growth, with the latter outpacing the cloud unit’s overall expansion. Additionally, Other Bets, encompassing life sciences unit Verily and self-driving car unit Waymo, reported revenue of $388 million, up from $297 million last year.
Waymo recently secured $5.6 billion in funding to expand its robotaxi services, while Google Lens, the company’s image recognition product, now facilitates over 20 billion visual searches monthly, making it one of the fastest-growing search products.
Alphabet’s third quarter was marked by significant internal and external changes, including leadership reshuffles and strategic reorganizations. The company replaced Prabhakar Raghavan with Nick Fox as search and ads boss and merged its Gemini app team with Google DeepMind under Demis Hassabis.
As Alphabet continues to navigate the evolving tech landscape, its commitment to AI-powered innovation and efficiency is expected to drive growth and competitiveness.
