Alphabet reported a profit of $26.3 billion, or $2.12 per share, a 34% increase from last year, with revenue up 15% year-over-year, reaching $88.27 billion. Alphabet CEO Sundar Pichai commented, “Our commitment to innovation and long-term AI investments is paying off.”
While AI investments are boosting Google’s capabilities, they’re also driving up costs. Alphabet’s capital expenditures, mostly for AI, surged by 62% to $13.1 billion in the past quarter, with similar spending expected for the last quarter of the year and beyond, according to Alphabet CFO Ruth Porat. However, Alphabet has also implemented cost-saving measures, including layoffs that have reduced its global workforce from 190,000 to about 181,000 over the past year.
One of AI’s impacts, according to Pichai, is its role in automating tasks once performed by employees; AI now generates over 25% of Google’s new code. Investors responded favorably to Alphabet’s results and company statements, driving the stock up by 5% in extended trading.
Regulatory Battles Cloud Google’s Future
Despite these strong financials, Google faces an uncertain future due to mounting regulatory issues. An ongoing U.S. Department of Justice antitrust case could have substantial consequences for the company. After declaring Google’s search engine an illegal monopoly, a federal judge has opened the door to potential penalties, including a possible breakup. Google also faces scrutiny regarding its control over Android’s Play Store and a digital ad monopoly case in Virginia.
In response to these competitive and legal threats, Google is restructuring its search engine to prioritize AI-generated summaries, aligning with consumer demands for more advanced, AI-powered search features.
Digital Ads and Cloud Services Drive Revenue
Google’s core search engine remains the backbone of its financial success. Revenue from search-driven digital ads increased 12% to $49.39 billion last quarter, while Google Cloud, driven by rising demand for AI services, saw 35% growth, bringing in $11.35 billion.
Although Alphabet shares have risen more than 20% this year, they remain below the peak levels reached in July when antitrust concerns first emerged. Google’s ongoing transformation, fueled by AI and cloud growth amid regulatory pressures, reflects a complex but resilient path forward for the tech giant.
