Alphabet shares rise on strong Q3 Earnings, revenue of $88.27 billion

Key Points:

1. Alphabet reports third-quarter revenue of $88.27 billion, up 15% year-over-year.
2. Google Cloud revenues rise 35% year-over-year.

Technology giant Alphabet Inc. (GOOG, GOOGL) announced its third-quarter financial results after the market closed on Tuesday. Alphabet shares rose as much as 6% in after-hours trading. Alphabet reported third-quarter revenue of $88.27 billion, marking a 15% increase year-over-year. This total exceeded the Street consensus estimate of $86.31 billion, according to data from Benzinga Pro.

Strong Q3 Earnings driven by Growth in Google Cloud and Advertising
The company reported third-quarter earnings per share of $2.12, surpassing the Street consensus estimate of $1.84.

Here’s a breakdown of the revenue for the third quarter, with the previous year's figures in parentheses:

Google Search: $49.4 billion ($44 billion)
YouTube Ads: $8.9 billion ($8 billion)
Google Network: $7.5 billion ($7.7 billion)
Total Google Advertising: $65.9 billion ($59.6 billion)
Additionally, the company reported $10.7 billion in revenue from Google subscribers, platforms, and devices, up from $8.3 billion the previous year. Google Cloud revenue reached $11.4 billion, a significant increase from $8.45 billion in the same quarter last year.

Sundar Pichai Highlights AI Innovation and Growth

Google Cloud revenues rose 35% year-over-year, with the company emphasizing continued growth driven by artificial intelligence.

"The momentum across the company is remarkable," said Alphabet CEO Sundar Pichai. "Our commitment to innovation and our long-term investment in AI are yielding benefits, with consumers and partners reaping the rewards from our AI tools."

Pichai noted that AI features are changing the way people search and what they search for.

The CEO also mentioned that the company is securing larger contracts and attracting new customers due to its AI solutions in the cloud.

For the first time, YouTube has surpassed $50 billion in total ad and subscription revenues over the past four quarters.

"I'm excited to continue driving advancements for consumers, customers, and creators worldwide," he added.

Leveraging AI for Enhanced Cost Efficiency

Alphabet is set to expand its ongoing cost-cutting initiatives by utilizing AI to optimize workflows, manage staffing, and reduce its physical presence, according to Ashkenazi.

"I aim to build on these initiatives while assessing opportunities to expedite projects and identify areas where we can pivot to allocate capital toward more promising ventures," said Ashkenazi, who joined Alphabet in June after a 23-year tenure at Eli Lilly.

The company reported advertising revenue of $65.85 billion, an increase from $59.65 billion a year prior, indicating steady growth in Google’s advertising sector, although at a slower rate compared to the second quarter.

YouTube’s ad revenue exceeded analysts’ forecasts, demonstrating stronger growth than in the previous quarter. The platform is facing heightened competition from advertisers gravitating toward alternatives like Netflix, TikTok, and Amazon.

AI advancements are enhancing YouTube's recommendation system, as noted by Chief Business Officer Philipp Schindler during an investor call. The introduction of Gemini, the company’s AI language model, has improved YouTube's ability to offer viewers more relevant, timely, and personalized content.

Google Workspace, the suite of cloud computing and productivity tools, experienced robust growth in the third quarter. Ashkenazi also highlighted that the Google Cloud Platform saw growth that surpassed that of the overall cloud unit during the same period.

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