Alphabet's Third Quarter Success Boosted the Stock

Alphabet reported results on Wednesday for the third quarter that led to a more than 5% increase in its stock value. The company exceeded Wall Street analysts' expectations due to growth in its artificial intelligence (AI) agreements and cloud segment.

The total revenue the company achieved for the three-month period ending on September 30 was reported as $102.4 billion. This figure is higher than the $99.85 billion estimated by Wall Street analysts tracked by Bloomberg and significantly above last year's $88.3 billion for the same period.

Google Cloud's 34% growth resulted in revenue of $15.2 billion. This amount surpassed last year's $11.3 billion as well as the $14.8 billion expected by analysts.

Additionally, Alphabet's adjusted earnings per share for the third quarter were set at $2.87, which is higher than the analysts' estimate of $2.26 and above last year's $2.12.

The company also raised its annual capital expenditure forecast from $85 billion to $92 billion. Alphabet and Google CEO Sundar Pichai stated, “We had a fantastic quarter, achieving double-digit growth in every major part of our business. We delivered our first $100 billion quarter.”

Alphabet, which is growing with its world-renowned AI models Gemini, shows that it is benefiting from the AI boom and that major names are signing up to utilize its cloud services. OpenAI included Google in its list of cloud infrastructure providers in July. Meta (META) signed a $10 billion agreement with Google Cloud.

On the other hand, AI chatbots, such as ChatGPT from OpenAI, pose a threat to the core search business. The new web browser of ChatGPT caused a temporary drop in Alphabet's stock. Loop Capital analyst Rob Sanderson assessed, “Whether Google can maintain its dominance in the search space is a significant structural uncertainty.”

Google's search division generated $56.6 billion in revenue during the September quarter, which was above the $55 billion forecasted estimate according to Bloomberg data.