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Google parent Alphabet surpassed analysts’ estimates for the third quarter on Wednesday. Suggested Reading Total revenue rose 16% year-over-year to $102.3 billion, beating estimates by the 16 analysts surveyed by Zacks Consensus Estimate who projected an increase of 13.6% compared to the year-ago quarter. Related Content “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 Sundar Pichai, CEO of Alphabet and Google, in a statement. Diluted earnings per share (EPS) reached $2.87, beating analyst estimates of $2.33, according to LSEG consensus. EPS growth was more modest because of heavy investment in data centers, AI chips, and cloud infrastructure, which have weighed on operating margins. Alphabet’s capital spending remains high, with full-year investment expected to be in a range of $91 billion to $93 billion. Alphabet is the second-best-performing Magnificent Seven stock year-to-date, JPMorgan noted in a report this week. But analysts want clarity when this current wave of capital expenditure will translate into higher cash flow, and thus, whether the market's positive tone is justified. Excluding the $3.5 billion charge related to the European Commission (EC) fine, operating income increased 22%. The company faces pressure to show that its advertising base remains healthy, and that its cloud and AI investments are beginning to turn into durable growth engines. Alphabet's earning surged 5% during after hours trading, capping off year-to-date gains of 44%. Ads, AI, cloud Advertising revenues from Search and YouTube came in at $56.57 billion, driven by AI-powered enhancements. This beats Zacks Consensus Estimate's prediction of $55.09 billion. Ad revenue no longer sees the double-digit growth rate quite like in its heyday, but it still accounts for most of Alphabet's profits. However, investors are watching whether its advance into cloud computing and AI can offset a slowdown in traditional ads. Google Cloud — the world's third-largest cloud platform — saw its revenue increase 34% year-over-year, taking the division's total revenue to more than $15.2 billion. This outpaces forecasts by Zacks Consensus Estimate of 29% and $14.66 billion. Growth was driven by strong demand for AI infrastructure, including new business from OpenAI and Meta, and a partnership with Anthropic that will use Google's in-house TPU chips. Investors have been waiting for Google's TPUs to come to market, anticipating they could be a "huge threat" to Nvidia's business, Business Insider reports. AI product news and favorable rulings Investors rallied behind Alphabet stock in the third quarter. Shares soared 38% during the period — the company’s strongest quarterly performance in two decades. Two tailwinds have shaped this sentiment: a mostly favorable regulatory overhang and a steady drumbeat of AI-product news. Alphabet’s greatest legal victory came when U.S. District Judge Amit Mehta in September ruled against the most drastic antitrust punishments that were brought by the Department of Justice. This would’ve resulted in the forced sale of Google’s Chrome browser - the data it accrues is crucial for generating targeted ads, which are the bedrock of its advertising business. The verdict sent shares soaring for days, pushing the company into the $3 trillion market capitalization club — a status currently only held by Nvidia, Microsoft, and Apple. President Donald Trump held a celebratory dinner for Google executives in Washington. On products, Alphabet stacked AI launches through the quarter. Chrome gained built-in AI features, Search’s “AI mode” added visual search, and Google Workspace, Gemini, and Cloud rolled out generative tools pitched at developers and enterprises. Analysts view this flurry of announcements as evidence that Alphabet is converting capital expenditure into consumer-facing products and growing enterprise demand. 📬 Sign up for the Daily Brief
