Google parent Alphabet reported Q3 earnings that beat on top and bottom lines with strong revenue growth from the company’s cloud unit. Alphabet said on Tuesday its AI investments were “paying off” as it reported a 35% surge in its cloud business and U.S. election-related spending lifted YouTube ad sales in the Q3. Stock of Alphabet rose as much as 6% in after-hours trading. Alphabet topped Q3 revenue and earnings expectations.
Alphabet’s earnings result
Here are the results:
Alphabet’s earnings per share: $2.12 vs. $1.85 expected by LSEG
Alphabet’s revenue: $88.27 billion vs. $86.30 billion expected by LSEG
The growth from YouTube advertising revenue was $8.92 billion vs. $8.89 billion. The Google Cloud revenue was $11.35 billion vs. $10.88 billion. Traffic acquisition costs (TAC) was $13.72 billion vs. $13.53 billion. The reports are as per StreetAccount.
Alphabet’s revenue grew 15% year over year, which is stronger than the same quarter last year.
Google cloud growth
The company reported blowout cloud revenue at $11.35 billion, up nearly 35% from the $8.41 billion a year ago. Alphabet attributed its strong cloud results to its artificial intelligence offerings, which include subscriptions for enterprise customers.
Alphabet CEO Sundar Pichai said on the earnings call with investors saying the company’s “full stack” of AI products is now operating at scale and being used by Google’s billions of users and “creating a virtuous cycle.”
Tech companies on a roll
The search company, Alphabet’s strong quarter kicks off a big week of earnings for tech’s megacap companies. Meta and Microsoft report on Wednesday, followed by Apple and Amazon on Thursday.
Alphabet’s income
Alphabet’s net income increased to $26.3 billion, or $2.12 per share, compared to $19.7 billion, or $1.55 per share, in the year-ago quarter.
Google’s search business generated $49.4 billion in revenue. That was up 12.3% from a year ago, and the search business remains the largest contributor to revenue growth for the company, said Alphabet Chief Financial Officer Anat Ashkenazi on the call.
Alphabet’s cost cutting measures
Alphabet plans to build on existing cost-cutting efforts around using AI to streamline workflow and manage headcount and the company’s physical footprint, Ashkenazi said.
The company reported advertising revenue of $65.85 billion. That was up from $59.65 billion a year ago, showing that Google’s advertising business continues to grow, though at a slower pace than in the second quarter.
YouTube ad revenue just beat analysts’ expectations, showing better growth than last quarter. The Google-owned company faces increased pressure from other advertiser options such as Netflix, TikTok and Amazon.
Other Bets, which includes the company’s life sciences unit Verily and self-driving car unit Waymo, reported revenue of $388 million in the third quarter. That is up from $297 million a year ago.
Last week, Waymo closed a $5.6 billion funding round to expand its robotaxi service in Los Angeles, San Francisco and Phoenix and to more cities.
Alphabet’s reorganization
Alphabet’s Q3 was filled with shake-ups externally and internally, including at its most senior ranks and its most important business.
Earlier this month, the company replaced Prabhakar Raghavan, the company’s search and ads boss since 2018, with Nick Fox, a longtime executive known for his role in Google’s Assistant unit. Additionally, the team working on the Gemini app, which includes the company’s artificial intelligence direct-to-consumer products, will join Google DeepMind under head Demis Hassabis.
The company on Tuesday announced it is evaluating how this reorganization will affect its segment operating results.
Alphabet stock
Alphabet share closed at a price of $181.22 rising nearly 6% in after-market trading on Tuesday. Shares of Amazon and Microsoft, the other top tech companies, were up about 1% after hours.
