Google's AI Strategy Pays Off with Historic $100 Billion Quarter

Google parent Alphabet posts first $100 bn quarter as AI drives growth

San Francisco (United States) (AFP) - Google parent Alphabet reported its first-ever $100 billion quarterly revenue on Wednesday, powered by strong growth across its core search business and rapidly expanding cloud division that was buoyed by artificial intelligence. The tech giant's revenues jumped 16 percent year-on-year to $102.3 billion in the third quarter, beating analyst expectations and marking a milestone for the company founded by Larry Page and Sergey Brin in 1998. "Alphabet had a terrific quarter, with double-digit growth across every major part of our business. We delivered our first-ever $100 billion quarter," said CEO Sundar Pichai in a statement. Net income surged 33 percent to $35 billion, with the company pointing to its ability to capitalize on the artificial intelligence boom that is reshaping the tech landscape. Google's core search and advertising business remained the primary revenue driver, generating $56.6 billion, up from $49.4 billion a year earlier. YouTube advertising revenues also grew strongly to $10.3 billion from $8.9 billion. But it was Google Cloud that stole the spotlight, with revenues soaring 34 percent to $15.2 billion. The cloud division, which competes with Amazon Web Services and Microsoft Azure, has become a key growth engine for Alphabet. The company's ambitious approach to offering AI "is delivering strong momentum and we're shipping at speed," Pichai said, highlighting the global rollout of AI features in Google Search and the company's Gemini AI models. The company said its Gemini App now boasts over 650 million monthly active users. However, the results were partially overshadowed by a $3.5 billion fine imposed by the European Commission in September for competition law violations in its ad tech business. Excluding this penalty, operating income would have increased 22 percent instead of the reported 9 percent, the company said. The strong performance comes as Alphabet ramps up capital spending to meet surging demand for AI infrastructure. The company now expects 2025 capital expenditures of between $91-$93 billion, reflecting massive investments in data centers and computing power to fulfill its AI ambitions. The company also reported having over 300 million paid subscriptions across services like Google One and YouTube Premium. Despite the robust growth, Alphabet's experimental "Other Bets" division, which includes autonomous vehicle unit Waymo, posted a loss of $1.4 billion on revenues of just $344 million. Google's shares have surged by nearly 40 percent in the thrid quarter, with investors also buoyed by the company's success in persuading a federal judge to deny a US government request that it sell off its Chrome browser as a solution in an antitrust trial. The judge was swayed by arguments that Google's world-dominating search engine -- the heart of Google's business -- faces stiff competition from ChatGPT and other AI chatbots.

Everyone Said AI Would Kill Google. Its First-Ever $100 Billion Quarter Just Proved Them Wrong

Every story about Google starts and ends with search. It makes sense -- Google is a search engine. It's not only the company's most important and profitable business, but it's the thing that has defined the internet for two decades. But for most of the past two years, the biggest story about Google has been that artificial intelligence would, inevitably, make search obsolete. People would stop "Googling" things because AI chatbots could just tell them the answers. Search -- the company's $200-billion-a-year cash cow -- was supposed to be doomed. On the one hand, the idea that people would no longer type queries into Google's search box and then click on the blue links that show up on results pages was a doomsday scenario. And AI chatbots certainly made that look increasingly likely. Then again, that story always assumed Google would sit still while the world around it changed. It assumed the company that practically invented the modern internet -- or at least the way most of us experience it -- wouldn't figure out how to adapt. On Wednesday, Alphabet, Google's parent company, reported its first-ever $100 billion quarter. Revenue rose 16 percent to $102.3 billion. Net income jumped 33 percent to $34.98 billion. Those are not the numbers of a company whose main business is being disrupted. It's more like the numbers of a company that's quietly figuring out how to change with the behavior of its users. Google Search and YouTube each grew at a double-digit pace. "Google Search & other" revenue climbed 15 percent to $56.6 billion. YouTube ads rose 15 percent to $10.3 billion. Combined, Google's advertising machine brought in more than $74 billion for the quarter. Not only that, but its cloud business grew by 35 percent over the previous year. That leads to the most interesting part of this story, which is the part about how Google is spending all that money. As it announced its earnings, Google said it would raise its capital expenditures, specifically as it invests in infrastructure to serve its cloud businesses. That's the part of the business that powers its AI ambitions. Google made more money than ever from search, and it's spending that money on AI. Training and running massive models requires staggering amounts of computing power. But that's exactly where Google's advantage lies -- it already owns what is probably the largest global computing infrastructure ever built. Now, it's doubling down. Alphabet expects to spend $91 billion to $93 billion in capital expenditures this year -- mostly on data centers, networking, and custom chips designed for AI workloads. That's up sharply from last year and puts Google in the same spending league as Amazon and Microsoft. And even with those huge investments, Alphabet's operating margin -- excluding a $3.5 billion European Commission fine -- rose to 33.9 percent. In other words, it's spending tens of billions to expand AI capacity while remaining one of the most profitable companies on the planet. Google's strategy isn't just about protecting search ads. It's about using the strength of that business to fund a transformation into something bigger: the dominant AI platform. That's still a big lift. Yes, Google is a household name, but it's still behind in AI -- at least in terms of consumer mindshare. OpenAI's ChatGPT is the front-runner in terms of customer adoption, but Google has almost every other advantage. It has the technology, the infrastructure, and a built-in user base that already trusts it as the default source of information. And because Google controls so many layers of the stack -- hardware, data centers, models, and consumer products -- it can absorb the cost of AI adoption in a way startups and rivals can't. It doesn't have to rent the future on someone else's platform; it's already building it. Now, Google is doing something very few companies have ever pulled off: funding its own disruption without losing momentum. Search and YouTube are still massive profit engines, generating the cash Google needs to build the infrastructure for AI. Basically, Google doesn't really care whether you type your queries into a search box or a chatbot window, as long as you keep asking it your questions. For all the hype about AI replacing search, this quarter makes one thing clear: Google's biggest business isn't dying. It's evolving into something that could be far more lucrative. If the company's $93 billion AI spending spree pays off the way Pichai expects, Google might have just figured out a better end of the story than search. Like this column? Sign up to subscribe to email alerts and you'll never miss a post. The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

Google's AI Push Delivers Its First $100 Billion Quarter

Google has also crossed 300 million paid subscriptions across verticals Google announced its quarterly earnings for the third quarter of 2025 on Wednesday, posting a revenue milestone of $102.3 billion (roughly Rs. 9.06 lakh crore). This is the first time the Mountain View-based tech giant has surpassed the $100 billion (roughly Rs. 8.8 lakh crore) mark. The company CEO, Sundar Pichai, credited the growth to the company's full-stack artificial intelligence (AI) approach that spans infrastructure, research, model development, tool deployment, as well as the consumer and enterprise-facing products and platforms. Google Says Full-Stack AI Approach Led to the $100 Billion Milestone Posting its third quarterly earnings report of 2025 online, the tech giant highlighted that the revenue milestone resulted in a consolidated 16 percent increase year-over-year (YoY) for the parent company Alphabet. Google Search, YouTube ads, subscriptions, platforms and devices, and Google Cloud each posted double-digit growth in the previous quarter. Breaking it down, Google services increased revenue to $87.1 billion (roughly Rs. 7.7 lakh crore), marking a 14 percent YoY growth, whereas Google Cloud posted a quarterly earnings of $15.2 billion (roughly Rs. 1.34 lakh crore), hitting a 34 percent YoY increase. During the Q3 earnings call, Pichai acknowledged that the revenue milestone was achieved on the back of the AI-led expansion of the company. He highlighted that Gemini now processes seven billion tokens per minute via direct application programming interface (API), whereas the consumer-facing app now has more than 650 million monthly active users (MAU). Additionally, the company also registered more than 300 million paid subscriptions led by Google One and YouTube Premium. "This was a terrific quarter for Alphabet, driven by double-digit growth across every major part of our business. We're seeing AI now driving real business results across the company, said Pichai, adding, "Five years ago, our quarterly revenue was at $50 billion. Our revenue number has doubled since then, and we're firmly in the generative AI era. In parallel, we've built for the long term and diversified, with successful businesses in Cloud, YouTube and subscriptions." Other notable achievements for the tech giant in the previous quarter include more than 230 million video generations using Veo 3, the confirmation of Gemini 3 AI model's release later this year, and 75 million daily active users in the recently launched AI Mode.

Alphabet Just Hit $100 Billion in a Single Quarter. Here's What's Driving It.

Alphabet's $100 billion quarter shows that AI has transitioned from an experimental feature to a key revenue driver. On Wednesday, Google's parent company, Alphabet, announced that it had exceeded $100 billion in quarterly revenue for the third quarter of the year -- the first time the company has reached this milestone. The earnings report showed that Alphabet's AI bet was paying off in the form of rising revenue for its AI services, especially Google Cloud. Alphabet posted $102.3 billion in revenue for the third quarter of 2025, a 16% year-over-year increase and double from $50 billion just five years ago. The figure was well ahead of analyst estimates of $99.89 billion for the quarter. Net income rose 33% to nearly $35 billion. Other big tech companies have hit this quarterly revenue before. Amazon, for example, exceeded $100 billion in quarterly revenue for the first time in the fourth quarter of 2020, with total sales of $125.6 billion for that period. The e-commerce giant is expected to report revenue between $174 billion and $179.5 billion for the third quarter of 2025 on Thursday. Apple also hit quarterly revenue of over $100 billion for the first time in its fiscal first quarter of 2021, driven by strong iPhone 12 sales. Apple will release its fourth-quarter earnings after the bell on Thursday and is expected to report revenue of $102.1 billion. Related: Nvidia Knocked From the Top? An Analyst Says Another Tech Titan Is the Most Valuable Company in the World. Alphabet's growth was driven by Google Cloud, which houses Alphabet's AI services. The division saw revenue rise 34% year-over-year to reach $15.2 billion, indicating growing demand for AI. The segment saw a backlog of customer requests, as demand for enterprise AI infrastructure and services exceeded the company's ability to supply them. Google Cloud ended the quarter "with $155 billion in backlog," Alphabet CEO Sundar Pichai said in the earnings release, a growth of 46% quarter-over-quarter. Alphabet's $100 billion quarter doesn't just mark a financial achievement. According to Tech Buzz, it's also evidence that AI has transitioned from an experimental feature to a key revenue stream. The company's successful range of AI products, including cloud services for enterprise, shows that it is going all-in on AI as a core growth engine. Pichai emphasized on the call that almost every major generative AI startup relies on Google Cloud, positioning Alphabet as an essential part of the AI economy. He said that over 70% of Google Cloud's existing customers use its AI products and gave the example of enterprise clients like Best Buy. Google Cloud signed more deals over $1 billion with enterprise clients in the first nine months of the year than it did the previous two years combined, Pichai mentioned. "This was a terrific quarter for Alphabet, driven by double-digit growth across every major part of our business," Pichai told investors during the earnings call on Wednesday. "We're seeing AI now driving real business results across the company." Alphabet is on track to rival some of its biggest competitors in revenue. Microsoft, for example, posted 40% revenue growth in its Azure cloud business on Wednesday. Azure hit $30.9 billion in revenue, up 28% from the previous year. Alphabet also disclosed on Wednesday in its earnings report that its flagship AI app, Google Gemini, now has more than 650 million monthly active users, up from 450 million last quarter. Gemini is playing catch-up with OpenAI's ChatGPT, which had 800 million users per week, according to OpenAI CEO Sam Altman's remarks earlier this month. Related: Google Introduces New Restrictions to Its Popular 'Work From Anywhere' Perk Other parts of Alphabet's business are also booming -- Google Search and YouTube each saw double-digit growth. Google Search revenue rose by 15% to $56.6 billion while YouTube ads increased by 15% to $10.3 billion. This year, Alphabet is doubling down on capital expenditures, or spending mostly on data centers and custom AI chips. The company expects to spend $91 billion to $93 billion on capital expenditures, between Amazon's $118 billion and Meta's $70 billion, and up from $52.5 billion in 2024. Even with those large investments, Alphabet remains profitable. Its operating margin, or the profit it made from core business operations per dollar of sales, was 30.5% in the third quarter. Alphabet stock was up 5% today and up over 50% year-to-date.

AI turned Google Cloud from also-ran into Alphabet's growth driver

Alphabet's cloud revenue topped $15 billion in the third quarter, a 34% increase reflecting strong demand for AI infrastructure and services, including Google's own Gemini model, the company announced Wednesday. Once a money-losing backwater, Google Cloud has become one of Alphabet's fastest-growing businesses, powered by massive bets on AI and years of costly investment in datacenters, custom chips, and networking gear. Alphabet's cloud revenue topped $15 billion in the third quarter, a 34% increase reflecting strong demand for AI infrastructure and services, including Google's own Gemini model, the company announced Wednesday. Google Cloud is now challenging YouTube as Alphabet's No. 2 cash generator behind its search ads business. "Google Cloud is one of the most important priorities for Alphabet as a whole and I expect it to play an even more central role as the company moves forward," Alphabet CEO Sundar Pichai told Reuters in an interview earlier in October. Much of the cloud unit's growth can be attributed to the business bets and diplomatic maneuvering of its head Thomas Kurian, who joined Google from Oracle in 2018 and grew the unit's market share from 7% then to 13% in 2025, according to Synergy Research Group, which tracks the cloud industry. When Pichai replaced Google co-founder Larry Page as CEO in 2019, he identified Google Cloud and YouTube as his two big bets to move Alphabet beyond its core business of search advertising. Since then, YouTube has largely delivered, becoming the world's largest video platform with 1 billion hours watched per day. By contrast, Google Cloud lost billions between 2018 and 2022 due to heavy investments in servers, datacenters and chips until it turned its first profit in 2023. Now, with generative AI, Alphabet sees a chance to close the gap with rivals Microsoft and Amazon, which hold 20% and 30% market share respectively. Making Google Cloud a contender has come at a cost: Alphabet has already shocked Wall Street twice during quarterly earnings this year by proclaiming higher-than-expected capital spending due to the need to build more infrastructure to fulfill cloud demand. "This is the moment Google Cloud was waiting for," Dave McCarthy, who directs coverage of the cloud industry for research firm IDC. "A lot of the future growth at Alphabet is being looked at through its potential." In exclusive interviews with Reuters, senior Alphabet executives mapped out the gameplan that transformed the also-ran into a growth driver: a cultural shift to a more customer-driven sales approach; changing how it worked with rivals; and a renewed focus on delivering profits. Get out of here, kid Back when Kurian joined Alphabet, Google Cloud struggled to win enterprise customers, unlike the ads side of the business which was dealing with the biggest companies in the world. "We would go to the ads team asking, 'Hey, can you help us out with this customer?' And they would basically be like, 'Get out of here, kid,'" said Josh Gwyther, a startup founder who worked at Google Cloud from 2016 to 2025. That's not a problem anymore: Google's scope of AI offerings have brought it into conversations with large companies that previously only considered Amazon and Microsoft. "The ads business is extremely healthy, but it's not going to grow at the pace that we are," said Matt Renner, Google Cloud's president of global revenue. Nine of the 10 leading AI labs are now customers, Kurian said at an industry conference in September. They include OpenAI, Anthropic and Safe Superintelligence. Details of Google's deals with two of those labs were first reported by Reuters earlier this year. To get there, Kurian took a mallet to traditional practices, replacing it with what several employees called an "un-Googley" culture. Kurian, who left a job as one of Larry Ellison's highest-paid lieutenants at Oracle, brought financial discipline to Google's "loosely-run, ground-up culture" that encouraged side projects and experimentation, said Chirag Mehta, a tech analyst who worked at Google Cloud from 2017 to 2021. To slash costs, Kurian opened new offices in cheaper locations, such as North Carolina and Poland. He audited Google Cloud's contracts for internal services and renegotiated those where he deemed his unit was being overcharged by other departments, as was first reported in The Information. He has ordered employees to focus on revenue rather than bookings. Google Cloud also shifted its sales strategy to target customers by sector rather than geography. That helped reduce sales reps being assigned accounts in industries where they lacked specialized knowledge, said Renner. Its focus on generative AI has allowed it to catch up with rivals Microsoft and Amazon from a technical standpoint, according to some analysts. "We believe that the three clouds competitively are on roughly equal footing," said Goldman Sachs managing director Eric Sheridan. "That's a very different competitive positioning for Google Cloud now than two or three years ago." Working with the enemy For years, Alphabet had reserved the lion's share of its own chips, or TPUs, for in-house use only. That changed in 2022, when Kurian successfully lobbied to move the group selling TPUs from Google's core engineering unit into Google Cloud. That move drastically increased Google Cloud's allocation of TPUs because the unit could now freely offer the chips rather than having to receive approval from another part of the company, according to two people familiar with the move. At a time when the world was scrambling for compute, Alphabet made the decision to make its chips available to not just its own DeepMind AI unit, but also to its competitors. That decision stoked tensions internally, according to former employees of both units, but it gave Kurian a stronger sales pitch for courting customers. "We are the only hyperscaler with both silicon and models of our own," he said. "How deep is your technical differentiation when the same stuff that you're reselling can be bought from somebody else?" Google Cloud quickly leveraged the opportunity to petition Anthropic to test TPUs as a viable alternative to Nvidia's GPUs, according to a former Google Cloud executive involved in the partnership. By 2024, Anthropic had seen enough to deploy Alphabet's TPUs at scale. In October, it expanded its deal with Google to use as many as one million TPUs, worth tens of billions of dollars. The startup, which is now valued at $183 billion, has also tapped Amazon for chips as it reduces its dependency on Nvidia, which controls about 80% of the AI chip market. "The whole world was sort of on GPUs, OpenAI in particular," said Dan Rosenthal, who manages Anthropic's partnerships with Google and Amazon. The need for chips "pushed us to be more flexible," he said. Other AI developers including Apple and Safe Superintelligence have since adopted Alphabet's TPUs. Pichai told analysts on an earnings conference call this week that Alphabet is "investing in TPU capacity to meet the tremendous demand we are seeing from customers and partners." And although Google Cloud launched an enterprise version of its flagship model Gemini in October, Kurian told Reuters he would welcome adding OpenAI's family of enterprise models to Google Cloud if the ChatGPT maker was interested. Power shift The ascent of Google Cloud is shifting the balance of power inside Alphabet. Current and former executives told Reuters Kurian has gained clout at Google's weekly "leads," the agenda-setting meetings where division leaders jostle over resources and priorities. "What Thomas has been a powerful voice for is making sure that when we say we're focusing on the user, that we're focusing on the enterprise customer too," Pichai said. It still has a long way to catch up with its rivals and it will be expensive to get there. In July, Pichai hiked Alphabet's projected capital spending for 2025 by $10 billion to $85 billion. This week, he raised the projection again to between $91 billion and $93 billion, adding that 2026 was likely to run an even larger bill. With concerns over an AI bubble growing, Pichai told Reuters that he expects Google Cloud's business to have "a lot of resilience" against short-term market corrections. "From our standpoint, we've been doing the AI thing for a decade now, and we're going to be doing it a decade from now."

Alphabet's Q3 Earnings Signal A Future $4 Trillion Valuation As AI Gamble Pays Off - Alphabet (NASDAQ:GOOG), Alphabet (NASDAQ:GOOGL)

The Magnificent Seven stock's powerful Q3 earnings show that the AI boom is still going as strong as ever. Google's parent company, Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) announced a 16% hike in third-quarter revenues, with growth throughout its digital advertising and cloud computing units set to finance the company's emphasis on developing its artificial intelligence infrastructure. Sales soared to a record $102.3 billion for the quarter, beating analyst expectations and fueling investor optimism for the stock's long-term prospects. Net income grew 33% over the same period last year to hit around $35 billion. At a time when speculation is mounting over the sustainability of the ongoing AI-driven market rally on Wall Street, Alphabet's impressive figures serve as an indicator of the sheer transformative potential of the technology. Most notably, Google's cloud division, which sells computing power to data centers, has grown exponentially alongside the tech giant's bid to develop artificial intelligence, with the company's cloud unit hitting $15.2 billion in quarterly revenue at a 34% increase from Q3 2024. Perhaps the most critical detail of Alphabet's third-quarter earnings report was the firm's bold expectations for substantial capital expenditures over the year ahead, with much of its revenue streams being used to build data centers to build and run AI models. Estimates for Google's capital expenditures for this year were lifted from $52.5 billion in 2024 to a range of $91 billion to $93 billion. The stock's shares leapt 6% in after-hours trading as a result of such a solid statement of intent from the tech leader. AI Drives Optimism While much of the early artificial intelligence furore among investors focused on the firms equipped to build the hardware to power the technology, like Nvidia (NASDAQ:NVDA), Alphabet has been level pegging with the world's most valuable stock since the beginning of 2025. The recent Q3 results show that the tech giant is very much an AI stock, and its Gemini large language model (LLM) has increased in popularity among institutional adopters this year, while some big-name developers have signed up to use Google's cloud services. July saw OpenAI add Google to its list of cloud infrastructure providers; meanwhile, Meta (NASDAQ:META) has reportedly agreed to a $10 billion deal with Google Cloud to use its services in a bid to secure the firm's own AI computing capacity. Google's AI prowess has even been growing in the weeks following the end of the third quarter, with Anthropic announcing an agreement with Google Cloud to use up to 1 million of its custom AI chips called TPUs in a deal that could drive up to $10 billion in annual revenue for Alphabet, according to estimations from the Bank of America. September saw Alphabet become the world's fourth company to surpass a market capitalization of $3 trillion. However, the firm's strong AI pipeline means that many investors will be eyeing a continuation of the stock's rally towards the $4 trillion mark. Off the back of the company's quarterly earnings, Oppenheimer analysts raised their price target for Alphabet to $345, citing the firm's strong AI momentum. But is there a risk that Google may be swept up into an artificial intelligence bubble? Is Tech Dependent on AI Success? The artificial intelligence boom has driven double-digit growth for the S&P 500 for two consecutive years, and 2025 is gearing up to be another year where stocks have been driven higher by investor enthusiasm for AI stocks. However, patches of weaker economic data in the United States, coupled with lingering trade tensions with China and the ongoing threat of new tariffs disrupting supply chains and the affordability of materials, all pose a threat to tech stocks that may not be fully factored into the prices we're seeing among industry leaders. The AI boom can only continue to rumble on by gaining the oxygen of institutional adopters, but there are some signs of friction as hype gives way to the widespread implementation of the technology. According to a recent IBM study, CEOs have suggested that only 25% of AI initiatives have managed to return the expected ROI in recent years, while just 16% of adopters have scaled the technology enterprise-wide. According to MIT insights, 95% of generative AI pilot projects have thus far failed to produce any discernible financial savings or significant profits, despite an estimated $30 to $40 billion in corporate spending on the technology. Is Google Going to Reach $4 Trillion? At a price-to-earnings (P/E) ratio of around 28, it's clear that investors have high expectations for Alphabet's future AI growth. However, for the stock to reach its potential, it's wholly dependent on a frictionless transition from the 'tell me' phase of AI innovation to the 'show me' phase. As Google doubles down on building a comprehensive artificial intelligence infrastructure, its recent earnings report suggests that its gamble is paying off. The road towards $4 trillion has become shorter in recent days, but it will ultimately be down to institutional AI adoption to decide the stock's long-term growth trajectory. Disclosure: On the date of publication, Dmytro Spilka did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer. Dmytro Spilka does not intend to make a trade in any of the securities mentioned above in the next 72 hours. Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy. GOOGAlphabet Inc$283.310.53%OverviewGOOGLAlphabet Inc$282.850.59%METAMeta Platforms Inc$653.950.86%NVDANVIDIA Corp$206.481.97%Market News and Data brought to you by Benzinga APIs

Google's CEO Pichai On Six Key Product Areas For Business Users As Quarterly Revenue Tops $100B

'We delivered our first ever $100 billion quarter. Five years ago, our quarterly revenue was at $50 billion. Our revenue number has doubled since then, and we are firmly in the generative AI era. In parallel, we've built for the long term and diversified with successful businesses in cloud, YouTube, and subscriptions. Our momentum is strong, and we are shipping at speed,' says Alphabet and Google CEO Sundar Pichai. For Google and its parent company Alphabet, the cloud and AI world have become resounding successes, helping drive double-digit growth across every major part of its business and giving the company its first quarter characterized by over $100 billion in revenue. Indeed, AI has become a key driver of real business results across Google, said Sundar Pichai, CEO of Alphabet and Google, during his prepared remarks on Wednesday during Alphabet's third fiscal quarter financial analyst conference call. "We delivered our first ever $100 billion quarter," Pichai said. "Five years ago, our quarterly revenue was at $50 billion. Our revenue number has doubled since then, and we are firmly in the generative AI era. In parallel, we've built for the long term and diversified with successful businesses in cloud, YouTube, and subscriptions. Our momentum is strong, and we are shipping at speed." [Related: Accenture CTO Jumps To Google Cloud To 'Accelerate' AI And Public Sector, CEO Says] Google's approach to AI spans a wide range of businesses from YouTube to Waymo autonomous driving, said Pichai. "Our full stack approach spans AI infrastructure, world class research, including models and tooling, and our products and platforms that bring AI to people everywhere," he said. Among the wide range of Google offerings, several stand out for their impact on business and the channel, including: Pichai provided updates on these and other offerings from the company. Here's a roundup of what he talked about in his own words. AI We are bringing AI to more people and developers than anyone else. In July, we announced that we processed 980 trillion monthly tokens across all our services. We are now processing over 1.3 quadrillion monthly tokens, more than 20x growth in a year. Phenomenal. This quarter, we took big steps to reimagine Chrome as a browser powered by AI through deep integrations with Gemini and AI mode in search, with more agentic capabilities coming soon. AI is driving an expansionary moment for search. As people learn what they can do with our new AI experiences, they're increasingly coming back to search more. Search and its AI experiences are built to highlight the web, sending billions of clicks to sites every day. During the Q2 call, we shared that overall queries and commercial queries continued to grow year over year. This growth rate increased in Q3, largely driven by our AI investments in search, most notably AI overviews and AI mode. Let me dive into the momentum we are seeing. As we have shared before. AI overviews drive meaningful query growth. This effect was even stronger in Q3 as users continue to learn that Google can answer more of their questions. And it's particularly encouraging to see the effect was more pronounced with younger people. We are also seeing that AI mode is resonating well with users in the U.S. We have seen strong and consistent week-over-week growth in usage since launch, and queries doubled over the quarter. Over the last quarter, we rolled out AI mode globally across 40 languages. In record time, it now has over 75 million daily active users. And we shipped over 100 improvements to the product in Q3, an incredibly fast pace. Most importantly, AI mode is already driving incremental total query growth for search. AI Infrastructure And GPUs Our extensive and reliable infrastructure which powers all of Google's products is the foundation of our stack and a key differentiator. We are scaling the most advanced chips in our data centers, including GPUs from our partner Nvidia, as well as our own purpose-built TPUs (Tensor Processing Units). And we are the only company providing a wide range of both. As we announced yesterday at Nvidia GTC, we are now shipping the new A4X Max instances powered by NVIDIA GB300 [GPUs] to our cloud customers. Our highly sought-after TPU portfolio is led by our seventh-generation TPU Ironwood, which will be generally available soon. We are investing in TPU capacity to meet the tremendous demand we are seeing from customers and partners, and we are excited that Anthropic recently shared plans to access up to 1 million TPUs. World-Class AI Research, Including Models and Tooling Our models are world leading. Gemini 2.5 Pro, Veo Genie 3, and our under viral sensation Nano Banana are among the very best in class. Over 230 million videos have been generated with Veo 3, and more than 13 million developers have built with our generative models. We're looking forward to the release of Gemini 3 later this year. Quantum Computing Last week, we announced that our Willow quantum chip achieved a major breakthrough, running an algorithm 13,000 times faster than one of the world's best supercomputers. And the result is verifiable, paving the way to future practical applications. Speaking of quantum, let me congratulate Michel Devoret, our chief scientist for quantum hardware. He received a Nobel in physics for early research he did in the 1980s. Three Nobels awarded to current Googlers in two years. Incredible. Google Cloud Our complete enterprise AI product portfolio is accelerating growth in revenue, operating margins, and backlog. In Q3, customer demand strengthened in three ways. One, we are signing new customers faster. The number of new GCP [Google Cloud Platform] customers increased by nearly 34 percent year over year. Two, we are signing larger deals. We have signed more deals [worth] over $1 billion through Q3 this year than we did in the previous two years combined. Third, we are deepening our relationships. Over 70 percent of existing Google Cloud customers use our AI products. ... As we scale, we are diversifying revenue. To date, 13 product lines are each at an annual run rate over $1 billion. And we are improving operating margins with highly differentiated products built with our own technology. This deep product differentiation starts with our AI infrastructure. We have a decade of experience building AI accelerators, and today offer the widest array of chips. ... It's why nine of the top 10 AI labs choose Google Cloud. We are also the only cloud provider offering our own leading generative AI models, including Gemini, Imagen, Veo, Chirp, and Lyria. Adoption is rapidly accelerating. In Q3, revenue from products built on our generative AI models grew more than 200 percent year over year. Over the past 12 months, nearly 150 Google Cloud customers each processed approximately 1 trillion tokens with our models for a wide range of applications. Gemini And Gemini Enterprise Our first party models like Gemini now process 7 billion tokens per minute via direct API use by our customers. The Gemini app now has over 650 million monthly active users, and queries increased by 3X from Q2. ... Earlier this month, we launched Gemini Enterprise, the new front door for AI in the workplace. And we are seeing strong adoption for agents built on this platform. Our packaged enterprise agents in Gemini Enterprise are optimized for a variety of domains, are highly differentiated, and offer significant out of box value to customers. We have already crossed 2 million subscribers across 700 companies.

Will Alphabet Be the World's Next $4 Trillion Stock? | The Motley Fool

Alphabet (GOOG 0.85%)(GOOGL 0.92%) is the parent company of Google, YouTube, Waymo, and more. Its stock has soared by a whopping 48% this year, as artificial intelligence (AI) drives accelerated revenue growth in critical businesses like Google Search and Google Cloud. Alphabet has a market capitalization of $3.4 trillion as I write this, so its stock only needs to gain a further 18% for the company to achieve a $4 trillion valuation. It would join an exclusive group of just three other companies that have crossed that milestone so far: Nvidia, Microsoft, and Apple, and here's why I think it will get there before any other company. When OpenAI's ChatGPT gained momentum at the start of 2023, investors were worried it would steal traffic away from Google Search, because the AI chatbot offered a more convenient way for people to find information online. Since Google Search consistently generates over half of Alphabet's total revenue, that would have been catastrophic for the company. But almost three years later, Alphabet has successfully pulled Google Search into the modern era with new features like AI Overviews and AI Mode. They are powered by the company's family of large language models (LLMs) called Gemini, which outperform some of the best models in the industry from leading developers like OpenAI and Anthropic. AI Overviews appear above the traditional Google Search results and combine text, images, and links to third-party sources to provide complete responses to queries. Users can also click a button to enter AI Mode, which opens a chatbot-style interface where they can refine their initial query to get a better response. These features save users from sifting through web pages to locate the information they need, creating a more convenient experience. AI Overviews are now used by over 2 billion people every single month, and Alphabet says they monetize at approximately the same rate as traditional Google Search advertisements, so they aren't cannibalizing the company's golden goose. In fact, during the third quarter of 2025 (ended Sept. 30), Google Search generated a record $56.5 billion in revenue. It was a 14.5% increase compared to the year-ago period, marking an acceleration from 11.7% in the second quarter just three months earlier, and from 9.8% in the first quarter. Google Search is Alphabet's largest business, but Google Cloud consistently generates the fastest growth. It brought in $15.1 billion in revenue during the third quarter, which was up 34% year over year. That growth rate accelerated for the second consecutive quarter. Businesses use Google Cloud to access digital services, from basic data storage to complex software development tools, but AI is the source of its momentum right now. The platform offers state-of-the-art data center infrastructure powered by graphics processing units (GPUs) from Nvidia, which are the premier chips for AI development. However, Alphabet also designed its own chips called tensor processing units (TPUs), which give developers more optionality compared to other cloud platforms. In fact, AI startup Anthropic plans to access 1 million of those TPUs. The deal is a huge win for Alphabet because its fierce rival Amazon -- which operates the world's largest cloud platform, Amazon Web Services -- owns around 15% of Anthropic. Google Cloud could be primed for even faster growth in the future, because it had a record-high order backlog of $155 billion at the end of the third quarter from customers who are waiting for more data centers to come online. That figure surged by 82% year over year, so demand is stacking up faster than Alphabet can fulfill it. Alphabet has generated trailing 12-month earnings of $10.14 per share, placing its stock at a price-to-earnings (P/E) ratio of 28. That's a discount to the Nasdaq-100 index, which trades at a P/E ratio of 33.2. In other words, Alphabet is much cheaper than its big-tech peers, on average. Its stock would have to rise 18.5% to match the P/E ratio of the Nasdaq-100, and that alone would boost the company's market cap to $4 trillion. According to Yahoo! Finance, Wall Street analysts expect Alphabet's earnings to grow to $10.96 per share in 2026, placing its stock at a forward P/E ratio of just 25.9. Using the same calculation as above, Alphabet stock would have to climb 28.1% to match the P/E ratio of the Nasdaq-100, resulting in a market cap of over $4.3 trillion. Looking at this a different way, that means Alphabet could join the $4 trillion club next year even if its P/E doesn't quite rise to the level of the Nasdaq. Considering the next-largest publicly traded company in the world (Amazon) has a market cap of just $2.7 trillion as I write this, I think Alphabet is the obvious pick to be the next $4 trillion company.

Google parent Alphabet posts first $100 bn quarter as AI fuels growth

Google parent Alphabet reported its first-ever $100 billion quarterly revenue on Wednesday, powered by strong growth across its core search business and rapidly expanding cloud division that was buoyed by artificial intelligence. The cloud division, which competes with Amazon Web Services and Microsoft Azure, has become a key growth engine for Alphabet. Google parent Alphabet reported its first-ever $100 billion quarterly revenue on Wednesday, powered by strong growth across its core search business and rapidly expanding cloud division that was buoyed by artificial intelligence. The tech giant's revenues jumped 16 percent year-on-year to $102.3 billion in the third quarter, beating analyst expectations and marking a milestone for the company founded by Larry Page and Sergey Brin in 1998. "Alphabet had a terrific quarter, with double-digit growth across every major part of our business," said CEO Sundar Pichai in a statement. Net income surged 33 percent to $35 billion, with the company pointing to its ability to capitalize on the artificial intelligence boom that is reshaping the tech landscape. Google's core search and advertising business remained the primary revenue driver, generating $56.6 billion, up from $49.4 billion a year earlier. YouTube advertising revenues also grew strongly to $10.3 billion from $8.9 billion. But it was Google Cloud that stole the spotlight, with revenues soaring 34 percent to $15.2 billion. The cloud division, which competes with Amazon Web Services and Microsoft Azure, has become a key growth engine for Alphabet. The company's ambitious approach to offering AI "is delivering strong momentum and we're shipping at speed," Pichai said, highlighting the global rollout of AI features in Google Search and the company's Gemini AI models. The company said its Gemini App now boasts over 650 million monthly active users and that a growing amount of users were using the company's AI Mode for search queries. However, the results were partially overshadowed by a $3.5 billion fine imposed by the European Commission in September for competition law violations in its ad tech business. Excluding this penalty, operating income would have increased 22 percent instead of the reported nine percent, the company said. The strong performance comes as Alphabet ramps up capital spending to meet surging demand for AI infrastructure. The company now expects 2025 capital expenditures of between $91-$93 billion, reflecting massive investments in data centers and computing power to fulfill its AI ambitions. It said its spending on capex would grow even more next year, though without providing more details for now. Microsoft and Meta, which also posted results on Wednesday, showed similar massive expenditures on AI infrastructure, which consume more energy than conventional data centers, strain electric power grids and use local water resources for cooling. The company also reported having over 300 million paid subscriptions across services like Google One and YouTube Premium. Despite the robust growth, Alphabet's experimental "Other Bets" division, which includes autonomous vehicle unit Waymo, posted a loss of $1.4 billion on revenues of just $344 million. Google's shares have surged by nearly 40 percent in the thrid quarter, with investors also buoyed by the company's success in persuading a federal judge to deny a US government request that it sell off its Chrome browser as a solution in an antitrust trial. The judge was swayed by arguments that Google's world-dominating search engine - the heart of Google's business - faces stiff competition from ChatGPT and other AI chatbots like Perplexity. Still, Google's search revenue was up nearly 15 percent from the same quarter last year.

Pichai Says Alphabet is 'Firmly in the Generative AI Era' | PYMNTS.com

"We are firmly in the generative AI era," CEO Sundar Pichai said on the conference call with analysts when the company posted third-quarter numbers after the bell. Double digit growth across several business lines, from search to ads to content, had the common underpinning of artificial intelligence (AI). Alphabet's third-quarter results underscored how its AI strategy is driving both growth and scale across its business. Google Cloud, which includes the company's AI infrastructure and generative AI solutions, saw revenues rise 34% to $15.2 billion, outpacing other divisions. The backlog has grown to $155 billion. Operating income for Cloud more than doubled to $3.6 billion from $1.9 billion a year earlier. First-party models like Gemini process 7 billion tokens per minute via direct API use from its customers, according to Pichai. The Gemini App now has more than 650 million monthly active users, and queries have tripled from Q2, Pichai said. AI is driving momentum in search, and AI Overviews are driving meaningful query growth, Pichai said. "Search and its AI experiences are built to highlight the web, sending billions of clicks to sites every day." Pichai said. "It's especially encouraging to see that the effect has been more pronounced with younger people." Enterprise remains a growth area in cloud, Pichai said, as the number of GPT customers increased by about 34% year over year. "We are signing larger deals," Pichai said of the cloud segment momentum, "as we've signed more deals over $1 billion in Q3 than in the previous two years combined." Revenues from products built on the company's generative AI models grew by 200%, Pichai said, year over year. The company has cross the 300 million mark in paid subscriptions, Pichai said, led by Google One and YouTube Premium. With a nod to YouTube Shorts, Pichai said that this business "earns more revenue per watch hour than traditional 'in-stream'" content. Philipp Schindler, CBO, said in his own remarks that Services revenues were $87 billion for the quarter, up 14%, tied to search and YouTube. Search and Other, as a category, was up 15% in revenues to $56.5 billion, with growth seen across all verticals, most notably retail and financial services. YouTube saw 15% growth in advertising revenues to $10.3 billion, driven by direct response. Schindler also pointed to shopping capabilities that have been added to AI Mode. "We've expanded try on capabilities to more clothing items, now available to anyone in the U.S. We're making it easier for consumers to benefit from deals through new loyalty offerings like personalized annotations in organic results and ads ... AI Max, he said, helps advertisers discover new customers at the exact moment they need a product or service," Schindler said. Anat Ashkenazi, CFO, noted that the $102.3 billion in consolidated top line, was up 15% year on year. Technology related costs of $14.9 billion were 8% higher than a year ago. "Other Bets" revenue was $344 million, and the operating loss in this segment was $1.4 billion. The company is devoting more resources to businesses including Waymo. During the question and answer session, analysts asked about agentic eCommerce. Schindler said, "This is all early, but we see agentic experiences, really, as additive to the way people seek information ... it helps people get stuff done and it helps businesses in the process. We're working on multiple agentic experiences across key verticals such as travel, commerce and shopping ... when we think of an agentic shopping future, it has to be one that benefits both the users and merchants," which he said comes from features like agentic checkout.

Alphabet's AI Bet Delivers Record $100 Billion Quarter, Cloud Backlog Surges To $155 Billion - Alphabet (NASDAQ:GOOGL)

Alphabet Inc. (NASDAQ:GOOG) (NASDAQ:GOOGL) reported a stellar third quarter, achieving its first-ever $100 billion revenue quarter, signaling that the company's aggressive "full stack" approach to AI is now translating into significant financial gains across its core businesses. Check out GOOG's stock price here. AI Backlog Explodes To $155 Billion The standout performer was Google Cloud, which saw its AI-driven backlog surge by an astonishing 46% sequentially to $155 billion. This monumental increase underscores robust enterprise demand, with CFO Anat Ashkenazi highlighting that Cloud has signed more billion-dollar deals in the first nine months of 2025 than in the previous two years combined "Cloud had another great quarter of accelerating growth with AI revenue as a key driver," said Sundar Pichai, CEO of Alphabet, emphasizing the direct link between AI adoption and Cloud's success. Google Search Gets An 'Expansionary' AI Boost Google's foundational Search business is also experiencing an "expansionary moment" thanks to AI. AI Overviews and AI Mode are actively driving query growth, with AI Mode alone now boasting over 75 million daily active users globally. Pichai noted, "Our full stack approach to AI is delivering strong momentum and we're shipping at speed, including the global rollout of AI Overviews and AI Mode in Search in record time." This growth in user engagement, even for commercial queries, suggests that AI is enhancing, rather than cannibalizing, Google's advertising ecosystem. The results solidify venture capitalist Chamath Palihapitiya's statement that the generative AI race will ultimately be won by established tech incumbents, not new startups, citing their "massive distribution" as the decisive factor. In an X post on Oct. 20, he stated that Google Gemini "has a huge runway ahead of itself as their models and services become better." See Also: Alphabet Q3 Earnings: Revenue, EPS Top Estimates, Google Parent Raises CapEx Guidance On 'Strong Momentum' Across The Business YT Shorts Earn More Revenue Per Hour Than Traditional Video YouTube, another critical segment, reported a 15% increase in advertising revenue, with a significant milestone reached. YouTube Shorts now generates more revenue per watch hour than traditional in-stream video in the U.S. This addresses prior concerns about short-form content monetization. Alphabet Raises CapEx, Signaling 'Significant Increase' In 2026 To meet the escalating demand for its AI infrastructure and services, Alphabet announced a significant increase in its 2025 capital expenditures to between $91 billion and $93 billion, with a "significant increase" projected for 2026. This aggressive investment, including scaling NVIDIA GPUs and Google's own TPUs, demonstrates confidence in the long-term returns from its AI leadership. As Pichai concluded, "Our leadership in AI positions us so well for the opportunity ahead." GOOG Clocks Over 44% Returns In 2025 Shares of GOOG closed 2.51% higher at $275.17 apiece on Thursday and advanced by 6.73% in after-hours. The stock advanced 44.35% on a year-to-date basis and 56.22% over the year. It maintains a stronger price trend over the short, medium, and long terms, as per Benzinga's Edge Stock Rankings, with a poor value ranking. Additional performance details are available here. On Thursday, the futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were lower. Meanwhile, on Wednesday, the S&P 500 index slipped 0.0044% to 6,890.59, whereas the Nasdaq 100 index rose 0.41% to 26,119.85. On the other hand, Dow Jones declined 0.16% to end at 47,632.00. Read Next: Chamath Palihapitiya Sees Current Tech Giants Having An Upper Hand In AI Wars: 'Google Has A Huge Runway' Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Photo courtesy: Shutterstock GOOGLAlphabet Inc$292.956.69%OverviewGOOGAlphabet Inc$293.506.66%Market News and Data brought to you by Benzinga APIs

Alphabet and the Battle of Hyperscalers: What Its Earnings Reveal About AI Demand | Investing.com UK

The artificial intelligence revolution has fundamentally reshaped the competitive landscape among the world's largest technology companies, commonly known as hyperscalers. These giants -- Google (Alphabet (NASDAQ:GOOGL)), Microsoft (NASDAQ:MSFT), and Amazon (NASDAQ:AMZN) -- dominate cloud infrastructure, enterprise services, and consumer platforms, positioning themselves at the forefront of AI innovation and deployment. As enterprises and consumers increasingly integrate AI into their operations and daily lives, understanding what these hyperscalers' latest earnings reveal about AI demand has become critical for investors, technologists, and business leaders alike. Their financial performance serves as a bellwether for the broader technology sector, hinting at how AI is reshaping business priorities and consumer behavior globally. The first quarter of 2025 has proven particularly illuminating, offering a window into how AI investments are translating into revenue growth and profitability for these tech titans. Companies that have strategically positioned themselves to capture both the infrastructure layer, where AI models are trained and run, and the application layer, where AI features are integrated into products, are showing the most substantial financial momentum. The earnings results from this period demonstrate that AI is no longer a nascent technology confined to research laboratories; it has become a core business driver that is directly impacting revenue growth, operational efficiency, and shareholder value across the hyperscaler ecosystem. Hyperscalers are distinguished by their massive infrastructure investments, global reach, and ability to serve both enterprise and consumer markets simultaneously. Google operates one of the world's most dominant advertising networks while simultaneously building cloud infrastructure and developing cutting-edge AI models, such as Gemini. Microsoft has positioned itself as the enterprise AI champion through its partnership with OpenAI and deep integration of AI capabilities across its Office 365 suite and Azure cloud platform. Amazon Web Services, through AWS, maintains the most significant cloud infrastructure footprint and offers a comprehensive array of AI and machine learning services to enterprise customers worldwide. These three companies represent a combined market capitalization of roughly $8-9 trillion and control the infrastructure, tools, and platforms through which most enterprise AI deployments occur. What sets hyperscalers apart from traditional technology companies is their ability to leverage AI across multiple business lines simultaneously. Google uses AI to improve search relevance and introduce features like AI Overviews, which now reach 1.5 billion users monthly. Microsoft integrates AI throughout its productivity suite while selling enterprise AI solutions through Azure. Amazon applies AI to logistics, retail operations, and AWS services. This vertically and horizontally integrated approach allows hyperscalers to benefit from AI investments in ways that more specialized technology companies cannot replicate, creating a competitive moat that widens with each advancement in AI capability. The infrastructure requirements for training and deploying large language models and other advanced AI systems have driven massive capital expenditure cycles at all three companies. These companies are investing tens of billions of dollars annually in data centers, GPUs, and networking equipment to support both their own AI development and their customers' growing demand for AI infrastructure. This capital intensity represents both an opportunity and a challenge: companies that build the proper infrastructure today will capture outsized returns from AI workloads for years to come, but miscalculations in capacity planning or technology choices could result in stranded assets and reduced returns on investment. Alphabet delivered powerful Q1 2025 results that underscore robust demand for AI across multiple vectors. The company reported consolidated revenues of $90.2 billion, representing 12% year-over-year growth, or 14% in constant currency. This performance was driven by double-digit growth across Google Search, YouTube advertising, Google subscriptions, and Google Cloud, with each segment benefiting from AI-driven improvements and innovations. Google Cloud revenues alone grew 28% to $12.3 billion, with robust growth in Google Cloud Platform services, AI Infrastructure, and Generative AI Solutions. This demonstrates that enterprise customers are actively deploying AI workloads and investing in the necessary infrastructure to support them. The company's operating income surged 20% to $30.6 billion. In comparison, operating margins expanded to 34%, a remarkable achievement that demonstrates AI investments are beginning to drive not just revenue growth but meaningful profitability improvements. Net income increased 46% year-over-year to $34.5 billion, with diluted earnings per share reaching $2.81, up 49% from the prior year. These earnings metrics reveal that AI is delivering returns on the substantial capital Alphabet has invested in infrastructure and model development. CEO Sundar Pichai specifically highlighted the rollout of Gemini 2.5, described as the company's most intelligent AI model, which is achieving breakthroughs in performance and serving as a foundation for future innovation. This indicates that competitive advantage in AI models themselves remains a key differentiator. Beyond these headline numbers, Alphabet's subscription business offers the most unambiguous indication of consumer adoption of AI products. The company has surpassed 270 million paid subscriptions across YouTube and Google One, driven in part by AI-powered features and premium services. This metric suggests that consumers are willing to pay premium prices for AI-enhanced experiences, validating the company's strategy of integrating AI across its consumer product suite. Additionally, Google Cloud's growth, particularly in AI infrastructure and generative AI solutions, reflects the increasing demand from enterprises for managed AI services and infrastructure, suggesting that businesses view AI as essential rather than optional for maintaining competitiveness. While complete comparative earnings data for Microsoft and Amazon for Q1 2025 is not available in the provided materials, the competitive positioning among hyperscalers reveals essential dynamics in the AI infrastructure race. Each company has adopted a distinct strategy: Google emphasizes its full-stack AI approach, leveraging superior AI models like Gemini combined with cloud infrastructure; Microsoft focuses on enterprise productivity and AI integration through Office 365 and Azure, leveraging its partnership with OpenAI; and Amazon relies on a broad services portfolio and AWS's market-leading position in cloud infrastructure. These different approaches create overlapping competitive dynamics where each company competes with the others in specific segments while occupying distinct niches in others. Alphabet's strong Q1 performance suggests that the combination of superior AI models, substantial infrastructure investment, and deep integration across consumer and enterprise products is resonating with both customers and investors. The company's operating margin expansion to 34% indicates that it is deploying AI efficiently across its operations, thereby improving productivity and reducing unit costs. The $8 billion unrealized gain on non-marketable equity securities also reveals the value creation potential in AI investments, though this represents an investment return rather than core business earnings. This diversified approach to capturing value from AI -- through infrastructure, products, subscriptions, and strategic investments -- provides resilience and multiple paths to profitability. The scale advantage of hyperscalers in the AI era cannot be overstated. Each company's ability to invest tens of billions in capital expenditure for AI infrastructure creates barriers to entry that smaller competitors cannot easily overcome. Furthermore, these companies' access to vast amounts of proprietary data, combined with their computational resources, creates a flywheel effect where success in AI generates more data and resources, enabling further AI advancement. This dynamic suggests that the AI era is likely to concentrate more power and profitability among the hyperscalers rather than dispersing it, a trend that Alphabet's Q1 earnings reinforce and exemplify. Alphabet's strong Q1 2025 earnings have reinforced the positive investor sentiment surrounding the company's AI strategy. The 49% increase in diluted earnings per share year-over-year, combined with the 20% growth in operating income, demonstrates that AI investments are generating tangible financial returns. The company's board also authorized an additional $70 billion share repurchase program on April 23, 2025. It increased the quarterly dividend by 5% to $0.21 per share, signaling management's confidence in the company's ability to generate sustained cash flows and create shareholder value in the AI era. These capital allocation decisions indicate that leadership views the company's AI positioning as secure and its profitability as sustainable. Looking forward, the outlook for Alphabet and hyperscalers more broadly depends on several key factors: continued corporate investment in AI infrastructure and services, the monetization of AI features across consumer products, competitive dynamics between hyperscalers, and broader macroeconomic conditions. Alphabet's guidance during the Q1 2025 earnings period is focused on sustaining investment in AI infrastructure, despite near-term margin pressure from capital expenditures, suggesting that management believes the long-term returns from AI will justify current investment levels. The company's ability to drive double-digit growth across multiple business segments while expanding operating margins suggests that AI is enhancing operational efficiency, not merely consuming resources. The potential risks to the hyperscaler outlook include competitive dynamics that could erode margins, slower-than-expected enterprise adoption of AI services, regulatory challenges to AI development and deployment, and technological shifts that could render current infrastructure investments less valuable. However, Alphabet's Q1 2025 results suggest these risks remain manageable for now. The company's diversified revenue streams, strong cash generation, and improving profitability provide a cushion against near-term headwinds. As the AI revolution continues to mature, investors should watch for signs that hyperscalers' AI investments are delivering returns proportional to the capital deployed, a test that Alphabet appears to be passing with flying colors in 2025. The Q1 2025 earnings results from Alphabet provide compelling evidence that AI demand is robust, multifaceted, and translating into concrete financial returns for companies positioned to capture value across infrastructure, products, and services. The hyperscaler advantage -- combining vast computational resources, leading AI models, diverse revenue streams, and global customer bases -- is becoming more pronounced in the AI era rather than diminishing. Alphabet's strong execution across Google Search, YouTube, Google Cloud, and consumer subscriptions demonstrates that companies can succeed with AI through multiple strategies simultaneously. *** Looking to start your trading day ahead of the curve? Get up to speed before the bell with Bull Whisper -- a sharp, daily premarket newsletter packed with key news, market-moving updates, and actionable insights for traders. Start your day with an edge. Subscribe to Bull Whisper using this link.

AI turned Google Cloud from also-ran into Alphabet's growth driver

NEW YORK, NY (Reuters) -Once a money-losing backwater, Google Cloud has become one of Alphabet's fastest-growing businesses, powered by massive bets on AI and years of costly investment in datacenters, custom chips, and networking gear. Alphabet's cloud revenue topped $15 billion in the third quarter, a 34% increase reflecting strong demand for AI infrastructure and services, including Google's own Gemini model, the company announced Wednesday. Google Cloud is now challenging YouTube as Alphabet's No. 2 cash generator behind its search ads business. "Google Cloud is one of the most important priorities for Alphabet as a whole and I expect it to play an even more central role as the company moves forward," Alphabet CEO Sundar Pichai told Reuters in an interview earlier in October. Much of the cloud unit's growth can be attributed to the business bets and diplomatic maneuvering of its head Thomas Kurian, who joined Google from Oracle in 2018 and grew the unit's market share from 7% then to 13% in 2025, according to Synergy Research Group, which tracks the cloud industry. When Pichai replaced Google co-founder Larry Page as CEO in 2019, he identified Google Cloud and YouTube as his two big bets to move Alphabet beyond its core business of search advertising. Since then, YouTube has largely delivered, becoming the world's largest video platform with 1 billion hours watched per day. By contrast, Google Cloud lost billions between 2018 and 2022 due to heavy investments in servers, datacenters and chips until it turned its first profit in 2023. Now, with generative AI, Alphabet sees a chance to close the gap with rivals Microsoft and Amazon, which hold 20% and 30% market share respectively. Making Google Cloud a contender has come at a cost: Alphabet has already shocked Wall Street twice during quarterly earnings this year by proclaiming higher-than-expected capital spending due to the need to build more infrastructure to fulfill cloud demand. "This is the moment Google Cloud was waiting for," Dave McCarthy, who directs coverage of the cloud industry for research firm IDC. "A lot of the future growth at Alphabet is being looked at through its potential." In exclusive interviews with Reuters, senior Alphabet executives mapped out the gameplan that transformed the also-ran into a growth driver: a cultural shift to a more customer-driven sales approach; changing how it worked with rivals; and a renewed focus on delivering profits. 'GET OUT OF HERE, KID' Back when Kurian joined Alphabet, Google Cloud struggled to win enterprise customers, unlike the ads side of the business which was dealing with the biggest companies in the world. "We would go to the ads team asking, 'Hey, can you help us out with this customer?' And they would basically be like, 'Get out of here, kid,'" said Josh Gwyther, a startup founder who worked at Google Cloud from 2016 to 2025. That's not a problem anymore: Google's scope of AI offerings have brought it into conversations with large companies that previously only considered Amazon and Microsoft. "The ads business is extremely healthy, but it's not going to grow at the pace that we are," said Matt Renner, Google Cloud's president of global revenue. Nine of the 10 leading AI labs are now customers, Kurian said at an industry conference in September. They include OpenAI, Anthropic and Safe Superintelligence. Details of Google's deals with two of those labs were first reported by Reuters earlier this year. To get there, Kurian took a mallet to traditional practices, replacing it with what several employees called an "un-Googley" culture. Kurian, who left a job as one of Larry Ellison's highest-paid lieutenants at Oracle, brought financial discipline to Google's "loosely-run, ground-up culture" that encouraged side projects and experimentation, said Chirag Mehta, a tech analyst who worked at Google Cloud from 2017 to 2021. To slash costs, Kurian opened new offices in cheaper locations, such as North Carolina and Poland. He audited Google Cloud's contracts for internal services and renegotiated those where he deemed his unit was being overcharged by other departments, as was first reported in The Information. He has ordered employees to focus on revenue rather than bookings. Google Cloud also shifted its sales strategy to target customers by sector rather than geography. That helped reduce sales reps being assigned accounts in industries where they lacked specialized knowledge, said Renner. Its focus on generative AI has allowed it to catch up with rivals Microsoft and Amazon from a technical standpoint, according to some analysts. "We believe that the three clouds competitively are on roughly equal footing," said Goldman Sachs managing director Eric Sheridan. "That's a very different competitive positioning for Google Cloud now than two or three years ago." WORKING WITH THE ENEMY For years, Alphabet had reserved the lion's share of its own chips, or TPUs, for in-house use only. That changed in 2022, when Kurian successfully lobbied to move the group selling TPUs from Google's core engineering unit into Google Cloud. That move drastically increased Google Cloud's allocation of TPUs because the unit could now freely offer the chips rather than having to receive approval from another part of the company, according to two people familiar with the move. At a time when the world was scrambling for compute, Alphabet made the decision to make its chips available to not just its own DeepMind AI unit, but also to its competitors. That decision stoked tensions internally, according to former employees of both units, but it gave Kurian a stronger sales pitch for courting customers. "We are the only hyperscaler with both silicon and models of our own," he said. "How deep is your technical differentiation when the same stuff that you're reselling can be bought from somebody else?" Google Cloud quickly leveraged the opportunity to petition Anthropic to test TPUs as a viable alternative to Nvidia's GPUs, according to a former Google Cloud executive involved in the partnership. By 2024, Anthropic had seen enough to deploy Alphabet's TPUs at scale. In October, it expanded its deal with Google to use as many as one million TPUs, worth tens of billions of dollars. The startup, which is now valued at $183 billion, has also tapped Amazon for chips as it reduces its dependency on Nvidia, which controls about 80% of the AI chip market. "The whole world was sort of on GPUs, OpenAI in particular," said Dan Rosenthal, who manages Anthropic's partnerships with Google and Amazon. The need for chips "pushed us to be more flexible," he said. Other AI developers including Apple and Safe Superintelligence have since adopted Alphabet's TPUs. Pichai told analysts on an earnings conference call this week that Alphabet is "investing in TPU capacity to meet the tremendous demand we are seeing from customers and partners." And although Google Cloud launched an enterprise version of its flagship model Gemini in October, Kurian told Reuters he would welcome adding OpenAI's family of enterprise models to Google Cloud if the ChatGPT maker was interested. POWER SHIFT The ascent of Google Cloud is shifting the balance of power inside Alphabet. Current and former executives told Reuters Kurian has gained clout at Google's weekly "leads," the agenda-setting meetings where division leaders jostle over resources and priorities. "What Thomas has been a powerful voice for is making sure that when we say we're focusing on the user, that we're focusing on the enterprise customer too," Pichai said. It still has a long way to catch up with its rivals and it will be expensive to get there. In July, Pichai hiked Alphabet's projected capital spending for 2025 by $10 billion to $85 billion. This week, he raised the projection again to between $91 billion and $93 billion, adding that 2026 was likely to run an even larger bill. With concerns over an AI bubble growing, Pichai told Reuters that he expects Google Cloud's business to have "a lot of resilience" against short-term market corrections. "From our standpoint, we've been doing the AI thing for a decade now, and we're going to be doing it a decade from now." (Reporting by Kenrick Cai in San Francisco. Editing by Kenneth Li and Michael Learmonth)