Alphabet, Google’s parent company, exceeded analysts’ forecasts with better-than-expected revenue and profit in the third quarter. The company reported $88.27 billion in revenue, surpassing the projected $86.3 billion. Earnings per share reached $2.12, compared to the expected $1.85. Google Cloud emerged as the primary growth driver, generating $11.35 billion, marking a 35% year-on-year increase. This rise reflects Alphabet’s strategic focus on expanding AI-powered solutions for enterprise clients. Alongside cloud services, Alphabet’s advertising business—particularly YouTube—contributed significantly to the quarter’s success. YouTube generated $8.92 billion, slightly ahead of StreetAccount analysts’ forecast of $8.89 billion.
The core advertising segment remained Alphabet’s largest revenue source, bringing in $49.4 billion, a 12.3% increase from the previous year. Anat Ashkenazi, Alphabet’s Chief Financial Officer, emphasized that advertising continues to play a pivotal role in the company’s performance and maintains healthy growth rates.
AI-Enhanced Cloud Services Boost Alphabet’s Growth
Google Cloud’s growth has been driven by increasing demand for cloud and AI solutions. The introduction of AI tools attracted new clients while boosting the company’s cloud performance. Alphabet highlights that its range of AI solutions now benefits billions of users worldwide. This interconnected system enhances the quality of Alphabet’s services and facilitates the further adoption of AI. CEO Sundar Pichai noted that the company’s strategic focus on cloud products provides a strong competitive edge in the evolving market.
Meanwhile, Alphabet’s advertising revenue reached $65.85 billion, up from $59.65 billion the previous year. Although growth has slowed compared to earlier quarters, YouTube’s ad revenue exceeded expectations, reflecting steady growth despite competition from Netflix, TikTok, and Amazon. Philipp Schindler, Alphabet’s Chief Business Officer, credited the introduction of the Gemini AI model for improving YouTube’s content recommendations, increasing personalization and relevance for users.
Diversified Growth and Key Personnel Changes
Alphabet’s cloud segment, including Google Workspace, continued to perform well, driven by strong customer demand. Ashkenazi pointed out that Google Cloud’s growth outpaced that of the broader cloud unit, signaling consistent expansion.
In other areas, Alphabet’s “Other Bets” division, which includes ventures like Verily (focused on medical technology) and Waymo (autonomous cars), reported $388 million in revenue, significantly higher than the $297 million reported in the same period last year. Waymo also secured $5.6 billion in funding to expand its robotaxi services to new markets, including Los Angeles, San Francisco, and Phoenix.
Google Lens, a visual search tool integrated into the e-commerce ecosystem, has become one of Alphabet’s fastest-growing products, surpassing 20 billion monthly searches. Its popularity, particularly for shopping, further strengthens Alphabet’s presence in the digital marketplace.
The third quarter also saw several key internal changes at Alphabet, adds NIXsolutions. Nick Fox, previously in charge of Google Assistant, replaced Prabhakar Raghavan as the head of search and advertising. Meanwhile, the team working on the Gemini AI model has been integrated into Google DeepMind, now led by Demis Hassabis.
Alphabet’s third-quarter performance highlights its ability to leverage both cloud and advertising strengths, ensuring steady growth despite competitive pressures. We’ll keep you updated on further developments as the company continues to evolve.