Google CEO Sundar Pichai speaks with Emily Chan at the APEC CEO Summit at Moscone Center West in San Francisco on November 16, 2023.
Justin Sullivan | Getty Images News | Getty Images
Google’s parent company alphabet reported third-quarter profit that beat top sales and bottom line, driven by strong revenue growth from the company’s cloud division.
The company’s shares rose as much as 6% in after-hours trading.
Here are the results:
Earnings per share: $2.12 vs. LSEG expected $1.85 Earnings: $88.27 billion vs. LSEG expected $86.3 billion
Here are some other numbers Wall Street was watching:
YouTube ad revenue: $8.92 billion vs. $8.89 billion (via StreetAccount) Google Cloud revenue: $11.35 billion vs. $10.88 billion (via StreetAccount) Traffic acquisition cost (TAC): 137 $200 million vs. $13.53 billion (according to StreetAccount)
Alphabet’s revenue was up 15% year over year, which was better than the year-ago period.
The company reported that cloud revenue exploded to $11.35 billion, up nearly 35% from $8.41 billion in the year-ago period. The company attributes its strong cloud performance to its artificial intelligence products, including subscriptions for enterprise customers.
Alphabet CEO Sundar Pichai opened a conference call with investors by saying that the company’s “full stack” of AI products is now running at scale, with Google’s billions of users. “This creates a virtuous cycle,” he said.
A strong quarter for the search company kicks off a big earnings week for the tech mega-company. meta and microsoft Reported on Wednesday, then apple and Amazon on Thursday.
Alphabet’s net income increased to $26.3 billion, or $2.12 per share, from $19.7 billion, or $1.55 per share, in the year-ago period.
Google’s search business generated $49.4 billion in revenue. That’s up 12.3% from a year ago, and the search business remains the biggest contributor to the company’s revenue growth, Alphabet Chief Financial Officer Anat Ashkenazi said on a conference call.
Turn to AI for further cost savings
Alphabet plans to build on existing cost-cutting efforts centered around leveraging AI to streamline workflows and manage the number of employees and the company’s physical footprint, Ashkenazi said.
Ashkenazy, who joined the company in June after 23 years at the drug maker, said: “We intend to build on these efforts further, but we are looking at where we can accelerate work and free up capital for more attractive opportunities.” We will also assess where we need to pivot.” Eli Lilly.
Alphabet reported advertising revenue of $65.85 billion. That’s up from $59.65 billion in the same period last year, and shows that Google’s advertising business continues to grow, albeit at a slower pace than in the second quarter.
YouTube’s ad revenue slightly exceeded analysts’ expectations and showed better growth than the previous quarter. The Google-owned company faces increasing pressure from other advertiser options, including Netflix, TikTok and Amazon.
Chief Business Officer Philipp Schindler said on a conference call with investors that AI is improving YouTube’s recommendations. The company’s AI language model, Gemini, gives YouTube the ability to “recommend more relevant, fresher, and personalized content to viewers.”
Ashkenazy said Google Workspace, the company’s collection of cloud computing and productivity suites, saw significant growth in the third quarter. Google Cloud Platform, the company’s data management and AI suite, grew faster than its cloud division during the quarter, Ashkenazy added.
Other Bets, which includes the company’s life sciences division Verily and autonomous vehicle division Waymo, reported revenue of $388 million in the third quarter. This is up from $297 million a year ago.
Waymo last week closed a $5.6 billion funding round to expand its robotaxi service in Los Angeles, San Francisco, Phoenix and more cities.
Pichai said Google Lens, the company’s image recognition product that uses mobile cameras and photos, is currently used in more than 20 billion visual searches per month. It is one of the fastest growing search products and is commonly used for shopping, he added.
Alphabet’s third quarter was filled with external and internal changes, including at its most senior positions and its most important businesses.
Earlier this month, the company replaced Prabhakar Raghavan, who had been head of search and advertising since 2018, with Nick Fox, a longtime executive known for his role in Google’s Assistant division. Additionally, the team working on the Gemini app, which includes the company’s artificial intelligence direct-to-consumer products, will join Google DeepMind under Demis Hassabis.
The company announced Tuesday that it is evaluating how the reorganization will affect the division’s results.