Alphabet Profit Skyrockets on Cloud Expansion and AI Demand

Alphabet Inc, the parent company of Google, has announced a striking 34 per cent rise in profit for the third quarter. This growth is largely attributed to the expansion of their cloud services, which are in high demand for computing and data solutions necessary to train and operate generative artificial intelligence models.

The solid quarterly results have eased investor concerns regarding the vast investments Alphabet and its competitors are making in artificial intelligence technologies. Particularly noteworthy is the performance of Google Cloud, which saw a 35 per cent increase in revenue to reach $11.4 billion. Its operating profit experienced a sevenfold increase, soaring to $1.9 billion compared to $266 million the previous year.

Overall, Alphabet’s net income jumped to $26.3 billion, surpassing analysts’ predictions of $22.8 billion. The company’s revenue rose by 15 per cent to $88.3 billion, exceeding the average estimate of $86.3 billion. Chief Executive Sundar Pichai highlighted the positive impact of long-term investments in AI, citing the company’s advanced chip clusters and the growing popularity of the AI Overviews feature in search results.

Revenue from Alphabet’s core search and advertising business grew by 10 per cent, reaching $65.9 billion. The growth rate slowed slightly, yet it showed resilience against AI chatbot challenges such as OpenAI’s ChatGPT. Meanwhile, YouTube experienced a 12 per cent revenue increase to $8.9 billion for the quarter, with its ads and subscription sales surpassing $50 billion over the past year.

Even though Google Cloud remains third in the market behind Microsoft Azure and Amazon Web Services, competition remains fierce. Microsoft has accused Google of running covert campaigns to undermine Microsoft’s regulatory standing and market position in an effort to capture a larger customer base.

Alphabet’s capital expenditure increased to $13.1 billion for the quarter, a 62 per cent rise from the same period last year. The bulk of this investment was directed towards infrastructure, including servers, chips, and data centres. With plans to spend similarly in the fourth quarter, Alphabet is projected to allocate over $50 billion for the year. Chief Financial Officer Anat Ashkenazi noted that this investment would slightly rise again in 2025.

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