For the first time in the company’s history, Alphabet, the parent of Google and YouTube, has surpassed $100 billion of revenue. The company posted its history-making third-quarter results on Wednesday.
“Alphabet had a terrific quarter, with double-digit growth across every major part of our business,” Sundar Pichai, CEO of Alphabet and Google, wrote in a letter to shareholders.
Revenue for Google Services increased 14% year-over-year to hit $87.1 billion. Every major division that makes up Services — Google search and other; YouTube ads; Google subscriptions, platforms and devices; and Google Cloud — saw notable growth during this time period. Google Search and other increased by 15%; YouTube ads increased by 16%; and Google Cloud increased by a notable 34%. Additionally, revenue for the Google subscriptions, platforms and devices devision grew by 21%.
Much of this growth, especially around search and Google Cloud, was the result of increased applications of artificial intelligence. AI Overviews as well as an AI Mode have been added to Google Search. As for Google Cloud, AI Infrastructure and Generative AI Solutions have been added to that offering, which ended the quarter with $155 billion in backlog.
Here are the quarter’s results:
Net income: $34.98 billion, a 33% increase compared to $26.3 billion a year ago.
Earnings per share: $2.87 per share, compared to $2.27 per share expected from analysts estimates compiled by Yahoo Finance.
Revenue: $102.3 billion, up 16% year over year and above the $100.1 billion expected from analysts estimates compiled by Yahoo Finance.
YouTube Ad Revenue: $10.3 billion, a 16% increase from the $8.9 billion reported a year ago.
Google Subscriptions, Platforms and Devices: $12.9 billion, a 21% increase from the $10.7 billion reported a year ago.
Alphabet also reported having 300 million paid subscriptions during the quarter, led by Google One and YouTube Premium. As for other notable numbers, Google Search’s AI Mode has over 75 million daily active users in the U.S., and the Gemini app has 650 million monthly active users.
As for YouTube, Alphabet repeatedly mentioned the platform’s NFL opening game, which happened back in September. For the first time, YouTube broadcast an NFL game globally and for free with ads, an experiment that resulted in 19.7 million viewers around the world. Ad inventory for the game sold out in only a couple of weeks, the company revealed.
YouTube viewership in the living room continues to be a priority as the platform announced several technical updates aimed at improving the experience earlier on Wednesday. One of those will allow viewers to more easily purchase products from their TVs in an effort to make channels more shoppable. YouTube Shorts also got a shoutout as creators in the U.S. earn more revenue per watch hour than traditional streams on YouTube.
Looking ahead to 2024, the company expects year-over-year revenues comparisons for YouTube ads won’t be as positive as the fourth quarter of 2024 reflected strong spending driven by the U.S. presidential elections.
Heading into the report, investors expected a big quarter for the company. During the three months ending in September, the company’s stock price soared 38%, hitting its best quarterly performance in two decades. In October alone its stock price climbed 11%, and Alphabet closed at a record all-time of $269.93.
Much of this bump reflects the increased optimism around Google in the AI race now that a ruling has been made in the company’s search antitrust case. In September, U.S. District Judge Amit Mehta ruled Google would not have to sell off its Chrome browser and it will still be able to mine search results for its generative AI product. Looking ahead, the search company will now have to share data with its competitors.
Another, less Alphabet-friendly decision was also made on a Google antitrust case hours before Alphabet reported its earnings. On Wednesday morning, a New York federal judge ruled in favor of online news publishers and advertisers alleging that Google monopolized the digital advertising market. The complaint was filed in 2023 by Gannett, the media company behind USA Today as well as several local newspapers. While making his decision, the judge pointed to the previous U.S. antitrust ruling made earlier this year.
Speaking of Alphabet’s legal woes, a $3.5 billion charge related to September’s fine from the European Commission was part of the company’s operating income for the quarter. In September, the Commission ruled Google’s search engine favored its own ad technology services, allowing Google to charge higher fees for said services. That preference was found to hurt both the company’s rivals and online publishers.
