Google’s powerful profits boosted by cloud computing growth

Alphabet’s boost jumped 34 per cent in the third quarter, as the US search giant reported powerful growth in cloud computing amid robust demand for computing and data services used to train and run generative artificial intelligence models.

Net profits was $26.3bn compared with $19.7bn in the same period a year earlier, exceeding analysts’ expectations for $22.8bn, the parent corporation of Google reported on Tuesday. profits rose 15 per cent to $88.3bn in the three months through to the complete of September, beating the average approximate for $86.3bn.

The standout unit was Google Cloud, where profits increased 35 per cent to $11.4bn and operating boost increased sevenfold to $1.9bn from $266mn in the same period last year.

profits at the corporation’s core search and advertising businesses rose 10 per cent to $65.9bn. YouTube rose 12 per cent to $8.9bn for the quarter — Google noted that its ads and subscription revenues surpassed $50bn over the history four quarters for the first period as the platform expands into sports such as the National Football League.

“We generated powerful profits growth in the quarter, and our ongoing efforts to enhance efficiency helped deliver improved margins,” said chief executive Sundar Pichai. “In Cloud, our AI solutions are helping drive deeper product adoption with existing customers, attract recent customers and triumph larger deals.”

“The results display a powerful beat across all segments, with notable strength in subscriptions and Cloud,” said Jefferies analyst Brent Thill.

Alphabet shares rose more than 5 per cent in after-hours market activity. The ownership had previously gained 22 per cent this year, giving it a trade capitalisation of $2.1tn and making it the fourth most valuable listed corporation in the globe behind Apple, Nvidia and Microsoft.

Google is the first of Silicon Valley’s tech giants to update profits this quarter, and its financials underline the vast sums that are being spent on data centres and advanced chips that power AI.

Microsoft, Alphabet, Amazon and Meta all revealed massive increases in capital spending in the first six months of 2024 — totalling $106bn — while their executives brushed off trade concerns about spending to pledge more capital this year and in 2025.

Alphabet’s capex rose again to $13.1bn in the quarter, slightly more than in the prior three months and up significantly from the $8.1bn spent in the same period last year.

While Alphabet has shown powerful profits momentum this year, it faces threats on several fronts. A recent creation of AI-powered chatbots such as OpenAI’s ChatGPT and Anthropic’s Claude are challenging its core search business. In response, Google has rolled out “AI Overviews” at the top of results pages to provide direct answers to queries, rather than just a list of links.

More immediately, Google faces the prospect of being broken up after losing an landmark antitrust case brought by the US Department of fairness, which resulted in a ruling that determined Google’s search business had engaged in anti-competitive monopolistic behaviour. The corporation also lost an antitrust case against its Play app store brought by Fortnite developer Epic and faces a trial in a second DoJ case over its ad tech business.

The corporation said it would pay a third-quarter payout of 20 cents a distribute worth about $2.5bn. The payout follows Google’s first payout earlier this year, breaking with a history policy to only use distribute buybacks to gain money to investors.