Google parent Alphabet said on Tuesday its AI investments were “paying off” as it reported a 35 per cent surge in its cloud business and U.S. election-related spending lifted YouTube ad sales in the third quarter.
Alphabet shares rose nearly 6 per cent in after-market trading on Tuesday. Shares of Amazon and Microsoft, the top cloud companies, were up about 1 per cent after hours.
Alphabet topped third-quarter revenue and earnings expectations. Its mainstay Search business jumped 12 per cent and as did revenue from YouTube ads.
“Alphabet is the first major tech name to report earnings, and it hasn’t disappointed,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Cloud growth was strong … which continues to support the argument that the major cloud providers are well-placed to benefit from the AI revolution.”
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 improving its AI-powered Search.
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 per cent to $13 billion. The fourth quarter is expected to be similar, she said.
Some analysts said Alphabet’s quarter looked impressive compared with low expectations, and that its small but growing cloud business could slowly fill in for its slowing ad business.
Google’s long-established dominance of the digital ad market is under threat from Amazon and TikTok, which have become popular with advertisers looking to tap a ready pool of buyers. Its Search business is also facing scrutiny from regulators seeking to break up the company.
But its cloud business grew at the fastest pace in eight quarters – to $11.35 billion – thanks to
