Alphabet Q3 revenue up at $88.3 bn; Investment in AI is paying off: Pichai

Alphabet Inc, parent company of Google, has reported 15% hike in its consolidated revenues for the third quarter ended September 30, 2024, or 16% in constant currency, year over year to $88.3 billion, reflecting strong momentum across the business.

Google Services revenues increased 13% to $76.5 billion, led by strength across Google Search & other, Google subscriptions, platforms, and devices, and YouTube ads.

Google Cloud revenues increased 35% to $11.4 billion, led by accelerated growth in Google Cloud Platform (GCP) across AI Infrastructure, Generative AI Solutions, and core GCP products.

Total operating income increased 34%, while operating margin percent expanded by 4.5 percentage points to 32%.

Net income increased 34% and EPS increased 37% to $2.12.

This growth is largely fuelled by its core advertising business, which alone contributed $65.9 billion. This figure surpassed analysts’ predictions, which forecasted $86.4 billion in overall revenue and $65.4 billion from ads. Alphabet’s earnings per share reached $2.12, significantly exceeding the anticipated $1.84, and net income totaled $26.3 billion, setting a new high and surpassing previous profit records from early 2024.

Despite Alphabet's impressive financials, including a 14% year-over-year revenue increase, the company’s stock growth has been more modest in comparison to other major tech players. Over the last year, Alphabet's shares rose by 37%, falling short of the S&P 500’s 40% gain and considerably behind Meta’s 96% surge. Concerns around Alphabet’s stock performance have largely been tied to ongoing antitrust investigations and the company's increased investments in artificial intelligence (AI), where competitors such as Amazon have also aggressively invested in cloud and AI capabilities.

Alphabet also achieved key milestones in its cloud sector, with Google Cloud’s revenue surpassing $10 billion for the first time this quarter, while its ad revenue from YouTube grew to $8.66 billion, up from $7.67 billion in the same period last year.

CEO Sundar Pichai commented, “The momentum across the company is extraordinary. 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.”

He further said, “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 $50 billion over the past four quarters for the first time.”

“We generated strong revenue growth in the quarter, and our ongoing efforts to improve efficiency helped deliver improved margins. I’m looking forward to driving more advances for consumers, customers and creators globally,” Pichai added.