Alphabet Inc., the parent company of Google, reported stronger-than-expected quarterly results as booming demand for artificial intelligence (AI) and cloud services powered growth across its core businesses. Both its advertising and cloud segments surpassed revenue forecasts, prompting the company to raise its capital expenditure outlook for the year to between $91 billion and $93 billion.
“We are investing to meet customer demand and capitalize on the growing opportunities across the company,” said CEO Sundar Pichai in the earnings release. Alphabet’s spending plans have expanded rapidly this year—from $75 billion announced in February to $85 billion in July, and now up to $93 billion—after investing $52.5 billion in 2024.
Alphabet Shares Jump on Earnings Beat
Following the results, Alphabet shares rose 6% in extended trading.
The company reported revenue of $102.35 billion for the quarter, topping analysts’ estimates of $99.89 billion. Adjusted earnings per share stood at $3.10, also beating expectations of $2.26.
Google Cloud Continues to Shine
Alphabet’s cloud computing division remained one of its fastest-growing segments, with revenue rising 34% year-on-year to $15.16 billion, ahead of estimates of $14.72 billion. The growth was driven by surging enterprise adoption of AI-powered infrastructure and data analytics tools.
Google Cloud’s backlog of non-recognized sales contracts jumped to $155 billion, compared with $106 billion in July, reflecting rising demand for its services. The unit continues to close the gap with major rivals Microsoft Azure and Amazon Web Services, supported by strong uptake of Vertex AI and Google’s Tensor Processing Units (TPUs).
Advertising Business Holds Strong
Revenue from Google’s advertising business—which remains Alphabet’s largest revenue contributor—rose 12.6% to $74.18 billion, exceeding expectations of $71.79 billion. The results eased concerns over the potential impact of AI on its core business and underscored the resilience of the digital ad market amid economic uncertainty.
Advertisers are gradually shifting spending from smaller experimental platforms toward established players like Google, even as global economic challenges and tariff-related costs weigh on sentiment.
Search Steadies Amid Rising Competition
Alphabet continues to face growing competition in the AI and search markets. Recently, Microsoft and SoftBank-backed OpenAI launched Atlas, an AI-powered browser positioned as a challenger to Google’s search ecosystem. Despite this, Google’s market share remains stable, supported by new features such as AI Overviews and AI Mode, which are gaining traction among users.
Workforce Update
Alphabet reported a workforce of around 190,000 employees at the end of September, up by over 8,000 from a year earlier. By contrast, rival Amazon announced plans to lay off 14,000 workers earlier this week.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Investors should conduct their own research or consult a professional advisor before making investment decisions.
