The Japan Times - Google parent Alphabet posts first $100 bn quarter as AI fuels growth

The tech giant's revenues jumped 16 percent year-on-year to $102.3 billion in the third quarter, beating analyst expectations and marking a milestone for the company founded by Larry Page and Sergey Brin in 1998.

"Alphabet had a terrific quarter, with double-digit growth across every major part of our business," said CEO Sundar Pichai in a statement.

Net income surged 33 percent to $35 billion, with the company pointing to its ability to capitalize on the artificial intelligence boom that is reshaping the tech landscape.

Google's core search and advertising business remained the primary revenue driver, generating $56.6 billion, up from $49.4 billion a year earlier.

YouTube advertising revenues also grew strongly to $10.3 billion from $8.9 billion.

But it was Google Cloud that stole the spotlight, with revenues soaring 34 percent to $15.2 billion. The cloud division, which competes with Amazon Web Services and Microsoft Azure, has become a key growth engine for Alphabet.

The company's ambitious approach to offering AI "is delivering strong momentum and we're shipping at speed," Pichai said, highlighting the global rollout of AI features in Google Search and the company's Gemini AI models.

The company said its Gemini App now boasts over 650 million monthly active users and that a growing amount of users were using the company's AI Mode for search queries.

However, the results were partially overshadowed by a $3.5 billion fine imposed by the European Commission in September for competition law violations in its ad tech business.

Excluding this penalty, operating income would have increased 22 percent instead of the reported nine percent, the company said.

The strong performance comes as Alphabet ramps up capital spending to meet surging demand for AI infrastructure.

The company now expects 2025 capital expenditures of between $91-$93 billion, reflecting massive investments in data centers and computing power to fulfill its AI ambitions.

It said its spending on capex would grow even more next year, though without providing more details for now.

Microsoft and Meta, which also posted results on Wednesday, showed similar massive expenditures on AI infrastructure, which consume more energy than conventional data centers, strain electric power grids and use local water resources for cooling.

The company also reported having over 300 million paid subscriptions across services like Google One and YouTube Premium.

Despite the robust growth, Alphabet's experimental "Other Bets" division, which includes autonomous vehicle unit Waymo, posted a loss of $1.4 billion on revenues of just $344 million.

Google's shares have surged by nearly 40 percent in the thrid quarter, with investors also buoyed by the company's success in persuading a federal judge to deny a US government request that it sell off its Chrome browser as a solution in an antitrust trial.

The judge was swayed by arguments that Google's world-dominating search engine — the heart of Google's business — faces stiff competition from ChatGPT and other AI chatbots like Perplexity.

Still, Google's search revenue was up nearly 15 percent from the same quarter last year.

K.Hashimoto--JT