Alphabet Q3 earnings spiked by Google Search and AI demand
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The news: Alphabet reported strong third-quarter earnings results, with revenue earnings beating expectations and numbers for its cloud division skyrocketing.
CEO Sundar Pichai said the results were evidence that its AI bet is paying off.
The numbers: Alphabet reported USD88.2 billion ($134.5 billion) in revenue for the quarter ending September 30, up 15% from the same period last year. About 75% of that is from selling digital ads.
Analysts expected the tech titan to report a revenue of USD86 billion, according to Bloomberg data.
The company's much-watched Google Cloud division was up 35%, to USD11.4 billion. This quarter was the first in which Cloud passed USD10 billion in revenue, and USD1 billion in operating profit.
Capital expenditure for the quarter was USD13 billion.
Net income for the quarter was USD23.3 billion, up nearly USD7 billion year on year.
The context: Alphabet is the second of the "Magnificent 7" to report quarterly earnings, at a time when investors are eager to see returns on the enormous capital expenditure Big Tech has deployed in developing AI.
That is why both capital expenditure and cloud divisions are closely inspected by investors. While a fraction of the size of the company's ad business, Google Cloud is viewed by investors as its next big growth area, and an opportunity to break into a market controlled by Microsoft and Alphabet.
The company says that artificial intelligence is boosting both its advertising business by improving Google Search, as well as Cloud, where its platform allows developers to build machine learning models.
What they said: “The momentum across the company is extraordinary," Pichai said. "Our commitment to innovation, as well as our long-term focus and investment in AI, are paying off with consumers and partners benefiting from our AI tools."
"In Search, our new AI features are expanding what people can search for and how they search for it. In Cloud, our AI solutions are helping drive deeper product adoption with existing customers, attract new customers and win larger deals. And YouTube’s total ads and subscription revenues surpassed [US]$50 billion over the past four quarters for the first time."
The source: Alphabet
