A Google building at the company’s campus in Mountain View, Calif., on Sept. 24.Jeff Chiu/The Associated Press
Alphabet Inc. GOOGL-Q topped third-quarter revenue and earnings expectations on Tuesday, helped by an AI-driven 35% surge in its cloud business as well as a jump in its digital advertising revenue.
Alphabet shares, which closed up 1.8% on Tuesday, were up 4.4% in after-hours trading. The stock has risen nearly 22% this year, in line with the broader market.
CEO Sundar Pichai said in a statement that investments in AI were “paying off” through use of and sales in its Search and Cloud businesses.
Perceived as slow to catch up with Big Tech rival Microsoft in the AI race, Google has been beefing up its Gemini AI chatbot and working out more improvements to its AI-powered search offering. The company is continuing to spend big on AI.
Its new chief financial officer, Anat Ashkenazi, fielding her first analyst call, said Alphabet’s capital expenditures in 2025 would be higher than this year.
In the third quarter, Alphabet’s capex rose 62% to $13 billion. The fourth quarter is expected to be similar, she said.
Revenue from Google’s cloud platform grew 35% to $11.35 billion in the third quarter, beating analysts’ estimate of $10.86 billion.
It was the fastest pace of growth in eight quarters, thanks to enterprises doubling down on cloud spending, which is essential to power artificial-intelligence technologies.
“I do think it was an impressive quarter because the fact that Google Cloud could more than offset Search decline speaks both to the growing importance of cloud revenues and the fact that the company continues to diversify its revenue base,” said Bob O’Donnell, president of TECHnalysis Research.
Analysts said users think the company’s new AI tools are more effective than previously – a significant improvement from earlier this year when the feature drew harsh criticism for displaying inaccurate answers, including a pizza recipe that listed glue as an ingredient.
Alphabet also beat profit expectations with earnings of $2.12 per share, compared with an average market estimate of $1.85, according to LSEG.
Alphabet’s total revenue increased 15% to $88.27 billion in the July-September period, while analysts on average expected $86.30 billion, according to LSEG data.
