Alphabet (GOOGL-US) crossed a major milestone this week, reporting quarterly revenue above $100 billion for the first time and sending its shares up more than 6% in after-hours trading on Wednesday (29th). The surge came as strong demand for Google Cloud and YouTube advertising helped the company beat Wall Street expectations, while management once again raised its capital expenditure forecast for 2025.
Earnings at a Glance
- Revenue: $102.35 billion vs. $99.89 billion expected
- Adjusted EPS: $3.10 vs. $2.33 expected
- Net Income: $34.97 billion, up from $26.3 billion last year
- Capex 2025: $91–93 billion (previously $75–85 billion)
Alphabet said the higher spending reflects growing demand for computing power, particularly from startups and enterprise clients adopting AI services. CEO Sundar Pichai highlighted a $155 billion backlog in Google Cloud orders, underscoring the scale of unmet demand.
Segment Highlights
- Google Cloud: Revenue jumped 35% year-over-year to $15.15 billion, nearly matching Microsoft’s Azure growth pace.
- Search: Still the company’s cash cow, search revenue rose 15% to $56.56 billion.
- YouTube Ads: Brought in $10.26 billion, topping estimates of $10.01 billion.
- Advertising Overall: $74.18 billion, up from $65.85 billion last year.
- Other Bets: Revenue slipped to $344 million from $388 million, with losses widening to $1.42 billion.
The "Other Bets" segment, which includes Waymo and Verily, remains a drag on profitability. According to Bloomberg, Alphabet is considering spinning off some of these ventures into independent startups.
Spending Big on AI
Alphabet’s capex forecast has now been raised twice this year, from $75 billion to $85 billion, and now to as much as $93 billion. Most of the funds are earmarked for data centers and infrastructure to support AI workloads.
Pichai emphasized that Alphabet is "driving strong growth in new businesses," with AI at the center. The company’s strategy mirrors moves by rivals like Microsoft, which also reported strong cloud growth this week.
Regulatory and Competitive Pressures
Not everything was rosy. Alphabet was hit with a $3.45 billion fine by EU regulators in September for monopolistic practices in ad tech, weighing on net profit. Meanwhile, competition in AI search and advertising is heating up.
Daniel Morgan of Synovus Trust noted that Google’s search usage loss to ChatGPT has stabilized, but BNP Paribas analyst Stefan Slowinski warned that OpenAI’s shift toward a for-profit model could bring more advertising into ChatGPT, intensifying the rivalry.
The Bottom Line
Alphabet’s latest results show a company still firing on all cylinders, with cloud and AI demand driving growth and advertising proving resilient. The raised capex outlook signals confidence in long-term infrastructure needs, even as regulatory fines and AI competition loom.
For now, Wall Street is cheering: Alphabet’s stock is up 45% year-to-date, and with cloud momentum accelerating, investors seem willing to bet that the company’s AI-heavy spending spree will pay off.