Alphabet Reports Profitable Quarter as Cloud Revenue Rises 35% Due to AI

Alphabet, Google’s parent company, reported a 35% surge in its cloud services and increased revenues in YouTube ads sales in this third quarter, claiming its AI efforts and investments have been successful. The official results shared in the company’s report were better than analysts expected.

“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,” said Sundar Pichai, Alphabet’s CEO.

According to Reuters, the tech giant’s shares rose 6% on Tuesday, surpassing both earnings and revenue expectations.

The cloud business grew to $11.35 billion while analysts estimated $10.86 billion. Digital advertising sales increased 10%—at a slower pace compared to the previous quarter—showing steady results. “YouTube’s total ads and subscription revenues surpassed $50 billion over the past four quarters for the first time”, states the document.

In total, Alphabet’s revenues increased 15% to $88.27 billion, and experts predicted $86.30 billion.

“Alphabet is the first major tech name to report earnings, and it hasn’t disappointed,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown, to Reuters. The analyst explained that the cloud growth looks strong and that it’s proof that it has been boosted by “the AI revolution.”

Anat Ashkenazi, Alphabet’s new chief financial officer, said the company’s expenditure will be higher next year. The company recently announced its plans to invest $3.3 billion in multiple data centers in South Carolina and a capital expenditure of $13 million in the last quarter. Google also recently announced an investment of $5.8 million to accelerate AI skills development across Sub-Saharan Africa.

Alphabet’s keeps growing strong despite the antitrust investigations from Italian authorities and antitrust cases in the United States.