Google parent Alphabet sees strong Q3 earnings driven by search, cloud

Google parent Alphabet has reported strong third-quarter 2024 results, with a surge in both the top and bottom lines, led by search as the largest contributor to revenue growth, followed by robust performance in cloud.

The internet giant’s stocks rose about 6% in after-hours trading.

The California-based company’s net profit in Q3 rose 33.6% to $26.3 billion (or $2.12 per share) from $19.7 billion ($1.55 per share) in the year-ago period. Its revenue in the quarter surged by 15.1% to $88.3 billion from $76.7 billion in the same period last year.

Sundar Pichai, chief executive officer of Alphabet and Google, said that the tech firm’s “long-term focus and investment in AI” is “paying off” with consumers and partners benefiting from its 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,” Pichai added.

Fuelled by the strong adoption of artificial intelligence, Google’s cloud business witnessed a 35% jump in revenue, touching $11.3 billion in Q3 compared to $8.4 billion in the previous year. Operating income in Google’s cloud division surged to $1.9 billion, growing over seven-fold compared to the earlier year.

“This business has real momentum, and the overall opportunity is increasing as customers embrace gen AI,” Pichai remarked on the Google Cloud growth, during the third quarter earnings call.

Google Cloud Platform—its cloud computing unit—which competes with Microsoft Azure and Amazon Web Services, has been playing a larger role in boosting the company’s business.

The majority of Alphabet’s revenue is derived from Google advertising. Its ad revenue, including Google Search, YouTube ads, and Google Network, was up 10.4% to $65.8 billion in the third quarter compared to $59.6 billion in the same period last year.

The company’s revenue from its largest business, Google’s search, rose 12.2% to $49.4 billion in Q3. Meanwhile, YouTube’s ad sales in Q3 saw an equivalent percentage increase to $8.9 billion.

For the first time ever, YouTube’s combined ad and subscription revenue over the past four quarters surpassed $50 billion, Pichai shared.

Focus on AI

Like other Big Tech companies, AI has been a major focus area for the Sundar Pichai-led firm. Google introduced its largest and most capable AI model—Gemini—in December, and has been bringing newer AI offerings consistently.

The tech’s giant chief highlighted the company is using AI internally to improve its  coding processes, which is boosting productivity and efficiency. 

“Today, more than a quarter of all new code at Google is generated by AI, then reviewed and accepted by engineers. This helps our engineers do more and move faster,” he elaborated.

Pichai believes that the tech firm is “uniquely positioned to lead in the era of AI” because of its “differentiated full stack approach to AI innovation”. He added that the company continues to invest in state-of-the-art infrastructure to support its AI efforts.

The company’s reported CapEx in the third quarter was $13 billion, reflecting investment in our technical infrastructure with the largest component being investment in servers, followed by data centres and networking equipment, shared Anat Ashkenazi chief financial officer of Alphabet and Google, during her first earnings call at the tech giant.

“Looking ahead, we expect quarterly CapEx in the fourth quarter to be at similar levels to Q3,” she added.

During the period, Other Bets, encompassing the Waymo self-driving car business, recorded a 30.6% increase in revenue, reaching $388 million. However, the division still incurred a loss of $1.1 billion.

“Waymo is now a clear technical leader within the autonomous vehicle industry and creating a growing commercial opportunity. Over the years, Waymo has been infusing cutting-edge AI into its work,” noted Pichai.

He added that each week, Waymo is driving more than a million fully autonomous miles and serves over 150,000 paid rides—the first time any AV company has reached this kind of mainstream use.

As of September 30, 2024, Alphabet’s employee count was 181,269 down from 182,381 in the same period last year.