Cloud and AI Lift Google-Parent Quarterly Profit

AFP/APP

San Francisco: Google-parent Alphabet reported a profit and revenue that exceeded expectations on Tuesday, as its AI-boosted cloud and search ad businesses thrived.

The tech giant announced a net income of $23.6 billion for the recently ended quarter, with revenue climbing 14 percent to $84.7 billion compared to the same period last year.

“Our strong performance this quarter highlights ongoing strength in Search and momentum in Cloud,” said Google CEO Sundar Pichai.

Alphabet’s cloud computing unit generated $10.3 billion in revenue, up from $8 billion in the same quarter last year. Search ad revenue also rose to $48.5 billion from $42.6 billion.

Despite the revenue boost, concerns remain about whether investments in artificial intelligence are yielding significant returns for tech companies.

Since the release of ChatGPT at the end of 2022, the sector has been racing to deploy generative AI programs for creating text, images, and other content through simple prompts.

“We are innovating at every layer of the AI stack,” Pichai said. “Our longstanding infrastructure leadership and in-house research teams position us well as technology evolves and as we pursue the many opportunities ahead.”

YouTube’s revenues, however, came in slightly below analysts’ forecasts at $8.66 billion. Emarketer senior analyst Evelyn Mitchell-Wolf expressed disappointment, given positive viewership trends and strategic decisions around live programming.

The earnings release coincided with reports that Israel-based cloud security startup Wiz has withdrawn from a $23 billion acquisition deal with Google, choosing to remain a private company.

Alphabet’s shares, which ended the formal trading day essentially flat, slipped more than a percent to $180.51 in after-market trades. Investors are keen to see if new AI-generated query result summaries, referred to as “Overviews,” impact online ad revenue at Google. This feature presents written text at the top of search results before traditional site links.

“With AI, we are delivering better responses on more types of search queries and introducing new ways to search,” Pichai said, noting increases in search use and satisfaction with AI-powered results.

On the earnings call, Chief Financial Officer Ruth Porat announced that Alphabet plans to invest another $5 billion in its Waymo autonomous car unit over the coming years.

Waymo One, a robotaxi service, recently became available to anyone in San Francisco interested in hailing a driverless ride. Waymo One is also available in Los Angeles and Phoenix, with plans to expand to Austin next.

Cloud Concerns

With their success, Google and other cloud giants are facing scrutiny from regulators in the US and Europe. Amazon, through its Amazon Web Services arm, Microsoft, and Google are the world’s largest providers of cloud-based data centers.

These data centers handle massive amounts of data and are integral to the operation of generative AI, which requires significant computing power—something that only the largest tech companies can provide.