Alphabet's subsidiary, Google Cloud, saw its revenue more than double in the third quarter, reaching $30.7 billion, which helped to mitigate the relatively modest growth performance of Google Search and YouTube.
Alphabet announced that its revenue for the third quarter was $127.6 billion, higher than $102.3 billion in the same period last year, representing a year-on-year increase of 25%, which is roughly in line with S& P Global Visible Alpha's forecast of $127.9 billion. Earnings per share decreased from $2.87 to $2.12. The reason for the decline was an $8.7 billion book loss on equity investments held by Alphabet, which reduced earnings per share by 55 cents. At the same time, operating profit increased by 30% compared to the same period last year, but slightly fell to $40.6 billion from $40.8 billion in the previous quarter.
During post-market trading on Wednesday, the stock price of Alphabet fell by 8% at one point.
Alphabet CEO Sundar Pichai stated during a teleconference with analysts on Wednesday: "The cloud business has accelerated significantly, with revenue growing by 48%, and the annualized revenue scale has now exceeded $70 billion." He also noted that Alphabet's annual revenue exceeded $400 billion for the first time.
In terms of capital expenditure, investors are closely monitoring these figures of all the largest cloud service providers, as the intense AI computing power competition has prompted companies to invest $2 trillion over two years. Alphabet reported that capital expenditure in the third quarter was $51.4 billion, compared to $24 billion in the same period last year.
This is the first time Alphabet has released quarterly financial results since announcing in June of this year that it had raised $84.8 billion through equity financing, including $10 billion from Berkshire Hathaway, to support the infrastructure construction of AI. This financing has resulted in Alphabet's free cash flow turning negative, at -$9.1 billion in the third quarter and -$5.9 billion in the second quarter.
According to a report by S& P Global Visible Alpha Research Global Head Melissa Otto, investors were previously concerned that the profit margin of Google Cloud had peaked in the previous quarter, but this business's profit margin has now expanded to 36.2%.
