Google parent Alphabet has exceeded Wall Street estimates on both revenue and profit for the third quarter of the year – according to its financials, this was led by rapid growth in AI and cloud services alike.
For the third quarter of the year, Alphabet secured a total of $88.27 billion in its revenue, marking a growth of 15% year-over-year (YoY) from the $76.7 billion it secured in the same period last year. It also exceeded analysis estimates of $86.3 billion. Q3 2024 also saw Alphabet’s net income amount to $26.3 billion (an increase from $19.7 billion), while its operating income climbed to $28.5 billion. The company’s diluted earnings per share (EPS) rose to $2.12/share, exceeding the estimated $1.85. Its operating margin rose to 32%.
From the looks of it, Google’s search business has been the main driver of this annual growth in revenue, accounting for more than 50% of the total revenue earned. For the three months ended September 30, 2024, the search business generated $49.4 billion in revenue, up by 12.3% from the corresponding quarter in the previous year.
“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. 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,” Sundar Pichai, CEO of Alphabet, commented on the matter.
Advertising revenue from YouTube for the quarter amounted to $8.92 billion, beating the estimated $8.89 billion. Google’s Cloud business was another unit to have performed well during the period, its revenue clocked an annual growth of 35% to rise from $8.41 billion to $11.35 billion for the current quarter. This exceeded analyst estimates of $10.88 billion, and according to Pichai, this growth can be attributed to the ever-increasing demand for AI services across industries and more and more firms opting to utilize Google Cloud’s infrastructure for their AI workloads. Revenue from Alphabet’s Other Bets division amounted to $388 million, an increase from $297 million a year earlier. This division consists of life sciences subsidiary Verily and autonomous vehicle unit Waymo.
Revenue from Google Network amounted to $7.5 billion for the current quarter, bringing the total amount of revenue generated by Google’s advertising business to $65.8 billion for Q3 2024. This is an improvement from the $59.65 billion it pocketed in revenue last year, and comes amidst competitive pressures from the likes of Amazon, TikTok, and Netflix. Still, this growth was slower compared to previous quarters, even though AI-powered recommendation algorithms have helped drive YouTube’s revenue growth for the current quarter.
This comes at a time when Alphabet has been increasingly focusing on managing its expenditure and cost-cutting efforts. It has already cut throusands of jobs in recent years, and it seems that things will not be changing for Alphabet employees anytime soon. “I plan to build on these efforts but also evaluate where we might be able to accelerate work and where we might need to pivot to free up capital for more attractive opportunities,” said Anat Ashkenazi, Alphabet CFO, adding that the company will soon use AI to streamline the workflow in the company.
