Alphabet's cloud computing division generated $11.4 billion in revenue for the third quarter, marking a 35% year-on-year increase. Analysts from Global X ETFs noted that Google holds the third-largest market share in the cloud sector, trailing behind Amazon and Microsoft, with significant growth potential remaining.
The rise in enterprise AI tasks is expected to further boost cloud revenue. Additionally, spending related to the upcoming U.S. elections has also positively impacted YouTube ad revenues.
Alphabet's core search engine business saw a 12.2% year-on-year revenue increase for the quarter. Although viewed as slower to respond in the AI race compared to competitors like Microsoft, Alphabet has been enhancing its Gemini AI chatbot and refining its AI-driven search engine.
Capital expenditures for the third quarter rose 62% year-on-year, with expectations of continued significant increases in the fourth quarter and into next year. The company emphasized its efforts to balance investments in AI with other growth areas. Over the past 18 months, Alphabet has reduced the cost of generating AI responses for search queries by over 90% through hardware, engineering, and technological advancements.
As the first major tech company to release quarterly results this week, Alphabet's performance will be closely watched, particularly in relation to upcoming reports from Microsoft, Amazon, and Meta regarding their AI expenditures and impact on corporate profits.