Alphabet’s Google saw its third-quarter cloud business soar by 35%. This growth has stemmed from investments the company made earlier into AI.
Earning report of the company has been released recently have come in ahead of estimates. The company is Alphabet, Google's parent and, the parent, with trading that almost jumped 6% in Alphabet stock after hours
Earning report from Alphabet issued on October 29, 2024, has highlighted areas of particular strength. Cloud division has reportedly brought in US$11.35 billion in revenue. This growth has been its fastest in eight quarters as enterprises continue to shift to the cloud to support AI technologies.
Core search business saw a 12% increase in revenue, and YouTube ad sales benefited from heightened election-related advertising.
"Alphabet is the first major tech company to report earnings this season, and it hasn't disappointed," said Matt Britzman, a senior equity analyst at Hargreaves Lansdown. He further added, "The strong cloud growth reinforces the notion that leading cloud providers are well-positioned to thrive amid the AI revolution."
Moreover, fears that Google was in an AI world that was much ahead of its competitors such as Microsoft had not mattered much as seen by its earnings report.
The company had been working hard to develop Gemini, a chatbot that it unveiled at the last I/O and fine-tune its search algorithms on AI. The new Chief Financial Officer Anat Ashkenazi said that there would be a rise for the next year also, after having surged by 62 percent last year to US$13 billion.
Alphabet's digital ad business rose 10% to US$65.85 billion, though analysts caution that the growth rate is decelerating from last quarter. The company also faces intensifying competition in the digital advertising market, where Amazon and TikTok have emerged as attractive alternatives.
eMarketer estimates that next year, Google will for the first time in 18 years lose the 50% share of the U.S. search ad market.
Google's ability to offset the decline in its search business is something that speaks to the growth of its cloud operations as well as a diversified revenue model, according to Bob O'Donnell, president of TECHnalysis Research. "It was an impressive quarter because Google Cloud could more than compensate for any decline in Search," he said.
Analysts are rather optimistic about Alphabet's prospects as the company is debuting new AI tools aimed to enhance users' experience. However, some analysts have forecast that Google will face a loss of market share for advertising in the coming years, as competition in the market is getting hard.
The future of the company will depend on Alphabet's ability to stay adaptive, especially with all the investment it has been making in AI and cloud technology.