Alphabet stock rises as strong cloud growth misses earnings estimates


Google parent Alphabet's (GOOG, GOOGL) stock rose 6% in after-hours trading Tuesday as the company reported fiscal third-quarter earnings that beat analysts' estimates on the top and bottom lines, boosting its cloud There was strong growth in business.

The search giant reported earnings per share of $2.12 and revenue of $88.27 billion for the quarter ended Sept. 30. This represents profit and sales growth of 37% and 15% respectively from the same period last year.

Analysts were expecting earnings of $1.83 per share on revenue of $86.44 billion, according to data compiled by Bloomberg.

Advertising revenue rose to $65.85 billion, compared with analysts' expectations of $65.5 billion, up from $59.65 billion in the year-ago period.

Google CEO Sundar Pichai highlighted the cloud unit's growth in an earnings call Tuesday, saying the company's AI portfolio is attracting new customers and leading to bigger deals. Cloud revenue was $11.4 billion, up 35% from the same period last year, exceeding expectations.

“There is real momentum in this business, and as customer adoption continues to grow, the overall opportunity is growing. AI,” he said.

The increase in cloud revenue comes as rivals Microsoft (MSFT) and Amazon (AMZN) are also expected to grow their cloud businesses and increase investment in AI infrastructure. CFO Anat Ashkenazi said on the call that Google plans to spend about $13 billion on capital expenditures for the current quarter. And the company expects another increase in AI and data infrastructure spending in 2025.

Google is also facing competition on its home turf with the introduction of increasingly sophisticated AI-powered chatbots. The Information reported on Monday that Meta (META) is developing its own search engine to power its Meta AI chatbot, which provides users with conversational answers to their questions and prompts.

How the next generation of answer engines compete with Google's traditional and AI-enhanced search remains a key question for the company.

Pichai described the expansion of AI search tools as a boost to the user experience. AI Overviews, Google's search feature that provides short answers to users' questions, now reaches 1 billion users on a monthly basis, the company announced on Monday.

Pichai said, “People are asking longer and more complex questions and exploring a wider range of websites. What's particularly exciting is that this growth actually increases over time as people discover that Google can answer more of their questions.”

Similar to legacy search results, users are shown ads that Google places with AI observations.

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