After the close of October 29th Eastern Time, Google's parent company Alphabet released its third quarter financial report for the 2024 fiscal year. It is worth noting that this is the best revenue performance set by Alphabet, while also breaking the record for the highest profit.
According to the financial report, Alphabet's third quarter revenue reached $88.268 billion, a year-on-year increase of 15%, higher than analysts' expectations of $86.44 billion; Earnings per share were $2.12, a year-on-year increase of 37%, exceeding analysts' expectations of $1.84; Net revenue was $26.3 billion, a year-on-year increase of 33.6%, exceeding analysts' expectations of $22.85 billion.
The company's major businesses have achieved unexpected growth, with cloud business revenue increasing by nearly 35% year-on-year, which is particularly impressive.
Since reaching its peak in July, Alphabet's stock price has fallen by about 11%. This correction reflects market concerns about the company's unfavorable situation in multiple antitrust lawsuits and the potential impact of AI chatbots on its core business. However, after the release of its financial report on Tuesday local time, Alphabet's stock price rose about 5% in after hours trading against the trend.
Google CEO Sundar Pichai said, "The overall development momentum of the company is strong. Our commitment to innovation and long-term focus and investment in the field of artificial intelligence are paying off, and consumers and partners are benefiting from our AI tools
AI drives cloud business to maintain strong growth momentum
Driven by the rapid development of artificial intelligence, Google's cloud business continues to maintain strong growth momentum. After the cloud business revenue exceeded $10 billion for the first time in the second quarter, it further climbed to $11.353 billion in the third quarter, a year-on-year increase of nearly 35%, exceeding analysts' expectations of $10.79 billion. Google attributes this impressive performance to its continuous innovation in AI products, especially its subscription service for enterprise customers.
CEO Sandal Pichai said in the conference call after the financial report: "Our leading position in the AI era benefits from the company's unique full stack AI innovation model, which has shown significant advantages in large-scale operations."
Pichai explained that Google's AI strategy includes three core elements: firstly, a strong AI infrastructure, including data centers, customized chips, and a global fiber optic network; Secondly, there is a research team composed of top talents who not only drive in-depth technological research in the field of AI, but also develop key models that support the company's business; Finally, extensive global coverage has formed a virtuous cycle through products and platforms used by billions of users and customers.
Pichai further pointed out that since Google began testing the AI overview feature, the machine cost of queries has significantly decreased. Over the past 18 months, through hardware optimization, engineering innovation, and technological breakthroughs, Google has reduced query costs by over 90% and doubled the scale of its self-developed Gemini model.
In addition, Google has widely applied AI internally to optimize the code writing process, significantly improving production efficiency, "Pichai said. Currently, more than a quarter of the company's new code is generated by AI and then reviewed and confirmed by engineers. This process helps the engineering team achieve more efficient output and significantly accelerates the development progress.
Pichai revealed that Google is developing new AI experiences that enable AI to "see" and understand the world around it, and "Project Astra" is a microcosm of this future. Google plans to launch such innovative experiences as early as 2025.
While cloud business revenue has significantly increased, Google's main competitors Microsoft and Amazon are also strengthening their cloud business development and increasing their investment in AI infrastructure. Google Chief Financial Officer Anat Ashkenazi revealed in a conference call that the company plans to invest approximately $13 billion in capital expenditures this quarter and will strive to balance investment needs and cost control in artificial intelligence and other growth areas to ensure the continued advancement of these growth strategies.
The growth rate of advertising business slows down
Google's search engine and YouTube video platform have experienced a slowdown in growth for two consecutive quarters, while online business revenue has declined by 2% year-on-year.
In the third quarter, Google's total advertising revenue reached $65.9 billion, a year-on-year increase of 10.4%, slightly lower than the 11.1% growth rate in the second quarter. Among them, search advertising revenue was $49.4 billion, a year-on-year increase of 12.2%, slightly lower than the 13.8% in the second quarter. Chief Financial Officer Ashkenaz pointed out that the search business remains the main driving force for the company's revenue growth.
YouTube's advertising revenue increased from $7.952 billion in the same period last year to $8.921 billion, a year-on-year growth of 12%, exceeding market expectations of $8.89 billion, but lower than the 13% growth rate in the previous quarter.
Google's Chief Business Officer Philipp Schindler stated that the core of YouTube is to support the development of creators, and artificial intelligence is opening up a whole new world of creativity for creators.
With the help of artificial intelligence, the YouTube recommendation system has also been greatly optimized. Through the Gemini driven language model, the system has gained a deeper understanding of video content and user preferences, enabling it to recommend more relevant, novel, and personalized content to the audience, "said Schindler.