Google Reports 35% Surge in Cloud Business, YouTube Ads Up 12% in Q3

October 30, 2024 at 5:07:53 AM - Trending 🔥

TL;DR Alphabet's Q3 saw a 35% surge in cloud business and increased YouTube ad sales due to AI investments and U.S. election spending. Revenue rose 15% to $88.3B with a 32% operating margin. Google Cloud revenue grew 35% to $11.4B, and YouTube ads increased 12% to $8.9B. Capex rose 62% to $13B. Despite competition and scrutiny, Alphabet's cloud business showed strong growth, offsetting Search declines. EPS was $2.12, beating expectations.

Google Reports 35% Surge in Cloud Business, YouTube Ads Up 12% in Q3

Alphabet, Google's parent company, reported strong third-quarter results for FY24, driven by significant growth in its cloud business and increased YouTube ad sales due to U.S. election-related spending.

Financial Highlights

Revenue: Increased by 15% year-over-year (Y/Y) to $88.3 billion, surpassing expectations by $2.0 billion.
Operating Margin: Improved to 32%, up by 4 percentage points Y/Y.
Earnings Per Share (EPS): $2.12, beating estimates by $0.27.

Google Cloud

Revenue: Grew by 35% Y/Y to $11.4 billion.
Operating Margin: Rose to 17%, an increase of 14 percentage points Y/Y.

YouTube Ads

Revenue: Increased by 12% to $8.9 billion.

Market Reaction

Alphabet shares rose nearly 6% in after-market trading.
Shares of Amazon and Microsoft, Alphabet's top cloud competitors, also saw a slight increase of about 1% after hours.

Business Insights

Alphabet's mainstay Search business and YouTube ads both saw a 12% increase in revenue.
The company is heavily investing in AI, with significant improvements in its Gemini AI chatbot and AI-powered Search.
Capital expenditures rose by 62% to $13 billion in Q3, with expectations for similar spending in Q4.

Analyst Perspectives

Analysts noted Alphabet's impressive quarter, particularly the strong cloud growth, which is essential for powering AI technologies.
Google's cloud business, growing at its fastest pace in eight quarters, reached $11.35 billion, exceeding analyst estimates of $10.86 billion.
The company's new AI tools have shown significant improvements, addressing earlier criticisms of inaccuracy.

Competitive Landscape

Google's dominance in the digital ad market is being challenged by Amazon and TikTok.
The Search business is under regulatory scrutiny, with potential threats of a breakup.

Conclusion

Alphabet's Q3 results highlight strong performance in cloud and ad revenues, driven by strategic investments in AI and cloud technologies. The company continues to diversify its revenue base amidst growing competition and regulatory challenges.