Steady performance: The Google headquarters in Mountain View, California. Google Cloud’s 34% revenue growth keeps it among Alphabet’s fastest-growing units, driven by rising enterprise demand for AI infrastructure and data analytics. — Bloomberg
SAN FRANCISCO: Strong AI demand has helped power Alphabet’s financial results, as both the core advertising and cloud computing businesses of the Google parent beat revenue expectations.
Despite whispers of concerns over a developing artificial intelligence (AI) bubble, the search giant boosted its projected capital expenditure (capex) for the year to between US$91bil and US$93bil.
“We are investing to meet customer demand and capitalise on the growing opportunities across the company,” chief executive officer Sundar Pichai said in Alphabet’s earnings release.
Alphabet, which spent US$52.5bil in 2024, had already shocked Wall Street twice this year with its aggressive spending ambitions, first declaring a US$75bil outlay in February, and then boosting the projection to US$85bil in July. Shares of the company rose 6% in extended trading.
The company reported total revenue of US$102.35bil for the quarter, compared with analysts’ average estimate of US$99.89bil, according to data compiled by LSEG. Adjusted profit per share of US$3.10 beat estimates of US$2.26.
Google Cloud’s 34% revenue growth helped it to remain as one of Alphabet’s fastest-growing segments, as it benefitted from surging enterprise demand for AI-powered infrastructure and data analytics services.
The unit posted revenue of US$15.16bil, topping estimates of US$14.72bil. The performance was boosted by burgeoning enterprise demand for its AI infrastructure, even as returns for businesses adopting the technology remain uncertain.
That is evidenced by Google Cloud’s backlog of non-recognised sales contracts, which grew to US$155bil, according to Pichai.
In July, Alphabet said the backlog had reached US$106bil.
The unit continues to close the gap with larger rivals Microsoft Azure and Amazon Web Services, aided by strong take-up of Vertex AI and its custom AI chips called Tensor Processing Units.
Competition in the broader AI and cloud market is intensifying, with rivals aggressively cutting prices and introducing new generative-AI capabilities.
Revenue from Google’s advertising business rose 12.6% to US$74.18bil, well above estimates of US$71.79bil, allaying fears of some investors and indicating that the digital ad market has remained robust in the face of economic uncertainty and intense competition.
Alphabet’s advertising unit, which contributes the vast majority of the company’s revenue, has been competing in a crowded field of rivals vying for more ad dollars as lower interest rates are expected to lift the economy. — Reuters
