Google Cloud Growth Driving Alphabet Sales

Alphabet has reported third-quarter sales that rose more than analysts estimated, helped by the demand for cloud computing services as the adoption of artificial intelligence soars.

Revenue, excluding partner payouts, increased to $74.6 billion (A$113.7 billion), surpassing the $72.9 billion (A$111.11 billion) analysts predicted on average, according to Bloomberg.

Google – whose stock has climbed more than 20 per cent this year – has seen growth from its cloud division as many of its customers are rapidly developing their own AI development capabilities to compete against the likes of Amazon and Microsoft.

“In cloud, our AI solutions are helping drive deeper product adoption with existing customers, attract new customers and win larger deals,” said Sundar Pichai, Alphabet’s Chief Executive Officer.

Sales in the cloud division rose to $11.4 billion (A$17.37 billion), compared to the $10.8 billion (A$16.46 billion) analysts projected.

Google is also introducing cost efficiencies that reduce the cost spent on some of its key processes. For example, the company reduced the cost of giving AI answers in search queries by over 90 per cent in 18 months, “through hardware, engineering, and technical breakthroughs,” while doubling the size of Gemini, the generative artificial intelligence model powering the answers.

Pichai has indicated that the company is also investing heavily in new forms of power, including nuclear, to handle future workloads.

Google trails Amazon and Microsoft in the cloud market, but there’s room for all three to grow. Ido Caspi, a research analyst at Global X ETFs, wrote in an email: “Increasing enterprise AI workloads will continue to bolster cloud revenues.”

Amazon’s cloud business continued its strong performance this year with AWS revenue jumping 19 per cent in the second quarter to A$40.52 billion. Amazon’s Chief Financial Officer Brian Olsavsky said the company had spent A$46.99 billion on capital expenditures in the first half of the year, including on data centres required to power AWS.