The Google parent reported total revenue of $102.35 billion for Q3, crushing analysts’ estimate of $99.89 billion and marking a milestone in its evolution to an AI infrastructure powerhouse. Results came days after OpenAI unveiled its ChatGPT Atlas browser, potentially the most significant challenge to Google’s search dominance in years.
Google Cloud emerged as the standout performer, posting revenue of $15.16 billion versus estimates of $14.72 billion, representing 34% year-over-year growth. The cloud computing unit continues closing the gap with Microsoft Azure and Amazon Web Services, aided by strong uptake of Vertex AI and custom Tensor Processing Units.
The performance signals Alphabet’s massive capital expenditure is paying dividends. The company raised its capex forecast to between $91 billion and $93 billion, up from $80.67 billion, underscoring confidence in sustained demand for generative AI infrastructure.
“Google Cloud has shown significant revenue growth, reflecting rising enterprise reliance on AI-driven insights,”
According to Futurum Group. CEO Sundar Pichai emphasized “nearly all Gen AI unicorns use Google Cloud,” positioning the company as critical infrastructure for the generative AI economy.
Google Cloud’s backlog now exceeds $106 billion, driven by enterprise demand for AI infrastructure. Deals over more than $250 million doubled year-over-year, while billion-dollar contracts accelerated sharply.
YouTube advertising revenue reached $10.26 billion, exceeding forecasts, while combined ad and subscription revenue surpassed $50 billion over four quarters, driven by YouTube TV, NFL Sunday Ticket, and YouTube Music Premium.
Alphabet’s core advertising business generated $65.85 billion, up from $59.65 billion a year earlier. While search advertising growth moderated, performance demonstrates resilience despite competition from Amazon, TikTok, and Netflix vying for advertiser dollars.
Results arrived amid rapidly evolving competition. OpenAI’s ChatGPT Atlas browser represents a direct challenge to Google’s search dominance. Alphabet shares fell 3.6% on the Atlas announcement before recovering on strong earnings.
With more than 800 million users, OpenAI’s browser positions ChatGPT as a gateway to internet searches, potentially diverting traffic and digital advertising revenue. The Atlas browser features built-in AI agents capable of completing tasks like booking flights or ordering groceries.
Alphabet’s AI features integration appears effective. AI Overviews and AI Mode have driven increased engagement, countering concerns about AI-powered competitors. Gemini models now reach over 1 billion users across platforms, while AI Overviews serve over 2 billion monthly users globally.
Competition in AI and cloud markets intensifies as rivals cut prices and introduce generative AI capabilities. Microsoft and Amazon expand cloud offerings, while Perplexity’s Comet browser seeks AI-powered search market share.
The capital expenditure increase reflects Alphabet’s commitment to maintaining competitive position in AI infrastructure. The nearly $12 billion increase signals confidence that investments will generate returns as AI adoption accelerates across enterprises seeking machine learning capabilities.
Pichai explained.
“Our AI infrastructure investments are crucial to meeting growth in demand from cloud customers,”
Spending targets servers, data centers, and networking equipment necessary for AI training and inference workloads.
Two-thirds of infrastructure investment goes to servers, with the remainder for data centers and networking. The company expects a “tight demand-supply environment into 2026,” reflecting industry-wide supply constraints for AI chips.
Wall Street’s positive reaction suggests investors view spending as strategic. Analysts from Wedbush Securities and Jefferies maintain bullish stances, citing Google Cloud growth and enterprise AI demand as justification.
Raymond James raised its Alphabet price target to $275, citing stronger search-advertising revenue and AI-driven efficiency. TECHi noted Alphabet’s AI investments are “positively impacting every part of the business,” with AI Overviews and AI Mode gaining traction while Search and Cloud deliver robust growth.
Wednesday’s results validate Alphabet’s transformation from advertising-dependent search company to diversified AI infrastructure leader. The company has committed capital, established cloud services momentum, and demonstrated advertising resilience despite competitive pressures.
Whether this fends off challenges from OpenAI’s Atlas and other AI-native competitors will unfold over coming quarters. The question isn’t whether Alphabet generates revenue, Wednesday’s $102 billion quarter answered that, but whether it maintains dominance as AI reshapes information access.
Integrating AI features across products while protecting advertising positions Alphabet uniquely among tech giants. As one analysis observed, “Alphabet has quietly established itself as the operating system for the AI economy”, a thesis Wednesday’s earnings strongly support.
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