Alphabet Beats Earnings Estimates as Google Cloud Fuels Revenue and Margin Growth

Google’s advertising division, which generates more than 70% of its income, posted sales of about $65.85 billion in Q3, up 10.4% from a year earlier.

Revenue from Google Search and other segments increased 12% to $49.4 billion, fueled by strong performance in finance and retail.

Google is leveraging artificial intelligence to enhance the search experience, boosting overall usage and user satisfaction. AI Overviews expanded to over 100 new countries and regions this week, now reaching more than one billion users monthly.

YouTube’s ad revenue rose 12% year-over-year in Q3 2024, reaching $8.9 billion. For the first time, YouTube’s combined ad and subscription revenues exceeded $50 billion over the past four quarters.

Google Cloud revenue accelerated 35% year-over-year to reach $11.4 billion, driven by robust growth in GCP's AI infrastructure, generative AI solutions, and other core GCP offerings.

"I am very pleased with our growth," Google CEO Sundar Pichai said during an earnings call. "This business has real momentum, and the overall opportunity is increasing as customers embrace generative AI."

Google Cloud's operating profit margin rose by 14 percentage points year-over-year and 6 points sequentially in the third quarter of 2024, hitting a record 17%. This improvement was largely due to enhanced operational leverage and increased efficiency in staff and technological infrastructure. Google's overall operating profit margin climbed 4.5 percentage points to 32.3%.

In Q3 2024, total capital expenditure surged 62% year-on-year, holding steady quarter-on-quarter at $13.1 billion. The bulk of spending was directed towards technology infrastructure investments, with 60% allocated to servers and 40% to data centers and network equipment.

Google CFO Anat Ashkenazi anticipates that fourth-quarter spending will remain roughly in line with the third quarter, at about $13 billion. Looking ahead, the company expects higher capital expenditure in 2025.