(News Bulletin 247) – Google’s parent company clearly exceeded expectations in the third quarter, both in terms of revenue and earnings per share. Its cloud services division accelerated, growing 35% in the third quarter.

First Gafam to return its copy this week, while waiting for the other four, Alphabet did not disappoint. The parent company of Google and Youtube “greatly exceeded expectations both in terms of turnover and profits, in a context of strong growth in cloud computing”, summarizes Deutsche Bank.

The stock jumped on Wall Street on Tuesday evening in closing trading following this publication, with Alphabet shares gaining 5.8%.

In the third quarter, Alphabet generated revenues of $88.27 billion, up 15% excluding currency effects year-on-year, while its earnings per share stood at $2.12 compared to $1.55. a year earlier, which represents a jump of 37%.

According to a consensus cited by Bank of America, analysts expected revenues of $86.41 billion and earnings per share of $1.85.

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Boost from the American presidential election

In detail, online search generated revenues of $49.39 billion and Youtube generated revenues of $8.92 billion, amounts slightly higher than the consensus (at $49.14 billion and $8.83 billion respectively).

Google’s chief business officer, Philipp Schindler, was quoted by Reuters as saying that the company’s advertising business had benefited somewhat from spending on the presidential campaign (election advertising is permitted in the United States) and this more pronounced on YouTube.

The highlight of Alphabet’s publication, however, remains the dynamism of its cloud division. Google Cloud posted growth of 35% in the third quarter, marking an acceleration compared to the second quarter (29%). Revenue came in at $11.35 billion versus $10.87 billion expected by analysts. As a result, this division’s operating profit increased seven-fold year-on-year to $1.95 billion.

“In the cloud space, our artificial intelligence (AI) solutions help drive deeper product adoption among existing customers, attract new customers and win larger contracts,” said Sundar Pichai, the CEO of Alphabet, quoted in a press release.

“Cloud growth has been robust… which continues to support the argument that major cloud providers are well positioned to benefit from the AI ​​revolution,” said Matt Brizman, analyst at Hargreaves Lansdown, quoted by Reuters.

Reduced costs

This AI-powered acceleration in cloud growth should reassure market fears. Investors have feared, in recent months, that Alphabet would struggle to compete with Microsoft or Amazon in the race for generative AI and thus find itself investing heavily for marginal growth gains.

A sign of these concerns, in July, during the previous results season, Alphabet faltered on the stock market despite results above expectations, because the company had warned that it would spend more than expected on AI, 900 million dollars more exactly.

However, Alphabet seems not to spend lavishly. According to Bloomberg, during the conference call with analysts, Sundar Pichai reported that Google had reduced the cost of producing AI answers to search queries by more than 90% in 18 months, “thanks to breakthroughs in hardware, techniques and engineering”, while doubling the size of Gemini, the generative artificial intelligence model behind these answers.