Shares of Alphabet Inc., the parent company of Google LLC, rose in after-hours trading today after the company posted solid profits, driven by strong growth in cloud revenue.
Alphabet’s stock rose more than 5% in after-hours trading, adding to a slight increase during regular trading.
The company reported third-quarter earnings, excluding certain costs such as stock-based compensation, of $2.12 per share on revenue of $88.27 billion, an increase of 15% from a year earlier. The results were better than expected. Wall Street had expected earnings to be just $1.85 a share, with sales down $86.3 billion.
Alphabet’s most important Google Cloud division had revenue of $11.35 billion, up 35% from the $8.41 billion in revenue it reported a year ago. The company said this growth was primarily driven by rapid updates to its artificial intelligence services, including subscriptions to enterprise customers.
In a conference call with analysts, Alphabet Chief Executive Sundar Pichai (pictured) said that Google Cloud’s “full stack” of AI products and services is already in operation at scale, with dozens of customers around the world. He claimed that it is used by 100 million people and is “creating a virtuous cycle.”
Today’s report makes Alphabet the first of several “mega-cap” technology companies to report the latest financial results, with Microsoft and Metaplatforms scheduled to report on Wednesday, and Amazon on Thursday. Dot.com Inc. and Apple Inc. are expected to follow. .
The company reported quarter-end net income of $26.3 billion, up from $19.7 billion a year earlier.
Alphabet Chief Financial Officer Anat Ashkenazi said Google search remained the single largest contributor in terms of revenue growth, with revenue of $49.4 billion in the quarter, up 12.3% year over year. said. He told investors that the company is looking to build on previous cost-cutting efforts, which included laying off thousands of people last year and hundreds more before that, by leveraging AI to streamline workflows. He said he plans to control the number of employees and physical footprint. this year.
“I intend to further strengthen these efforts, but I will also assess where we can accelerate our work and where we need to pivot to free up capital for more attractive opportunities.” Ashkenazy joined Alphabet in June after spending a year at major Eli Lilly and Co.
Alphabet’s advertising business also grew steadily during the quarter, with revenue of $65.85 billion, up from $59.65 billion in the same period last year, but growth slowed from the previous quarter.
YouTube’s ad revenue within this segment was $8.92 billion, slightly above analysts’ target of $8.89 billion and growing faster than last quarter. The growth was encouraging as the Google-owned company faces intense pressure from other advertising competitors, including Amazon, Netflix and TikTok’s parent company ByteDance.
Philip Schindler, Alphabet’s chief business officer, said one reason for the growth is that AI is helping improve YouTube’s recommendations. He claimed that it uses the Gemini family of large-scale language models to recommend “more relevant, fresher and more personalized content” to viewers.
Thomas Monteiro, an analyst at Investing.com, said Alphabet’s results will be taken as a harbinger of what’s to come for other big tech stocks, which are scheduled to report results later this week. He said he expected a “very strong season due to our resilient economy and economy.” The financial outlook is becoming increasingly supportive. ”
Analysts believe this is reflected in both Alphabet’s cloud and advertising businesses. “While some of these numbers are certainly seasonal, especially with increased interest in YouTube and search following the U.S. election, there are some markets that don’t seem to have the full tailwinds. “The stock is fairly undervalued,” Monteiro said.
Another bright spot is the performance of Google Workspace, Alphabet’s suite of productivity tools. Ashkenazy said Google Cloud Platform, the company’s data management and AI development suite, is showing “strong growth” as well, with revenue growing faster than the cloud division as a whole.
Alphabet’s Other Bets unit, which includes its life sciences business Verily and self-driving car unit Waymo, had sales of $388 million in the quarter, up from $297 million in the same period a year earlier.
Waymo closed a massive $5.6 billion funding round last week and is aiming to expand its nascent robotaxi service beyond Los Angeles, Phoenix and San Francisco, where it currently operates.
Pichai also mentioned Google Lens, an image recognition product that uses a smartphone’s camera to perform visual searches. Pichai said usage of the service has grown to more than 20 billion visual searches per month, making it one of the company’s fastest-growing products. He said it’s most often used by shoppers to find out more information about the products they’re looking at.
During this quarter, Alphabet’s leadership team underwent considerable change. Along with Ashkenazy’s appointment, the company replaced Prabhakar Raghavan, the company’s longtime head of search and advertising, with Nick Fox, who previously led the team that led the development of Google Assistant. Additionally, Alphabet revealed that the team responsible for the Google Gemini app will join Google DeepMind and report to Demis Hassabis.
Pivotal Research Group analyst Jeffrey Wlodarczak praised Alphabet’s overall strong performance. “We reported better-than-expected revenue across all categories, including search, YouTube ads, and Google Cloud, leading to more than 15% revenue growth,” he said.
Given the results, Wrodarczak said Pivotal is raising its expectations for Alphabet from the fourth quarter onwards, reiterating its “buy” rating on the stock, which still has “significant upside potential from current levels.” .
Photo: Google
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