On Tuesday, Alphabet Inc.’s shares surged after an upbeat third-quarter earnings report, driven by skyrocketing artificial intelligence (AI) cost-efficiency.
The California-headquartered firm’s stock jumped 1.78% to $169.69 apiece on October 29, followed by a 5.79% after-hours climb to $179.50. Analysts anticipate the rally to continue for the fourth session in the coming trading day with a 2.96% gain to $184.81 per share.
In the September quarter, Alphabet posted adjusted earnings per share (EPS) of $2.12, compared to the market consensus of $1.84. This marked a significant quarter-over-quarter (QoQ) increase from $1.89 in the previous quarter.
Likewise, Google’s parent company disclosed consolidated revenues of $88.27 billion, topping the Wall Street estimate of $86.37 billion. The reading represented moderate QoQ growth from $84.74 billion in the June-August period.
Advertising sales, Alphabet’s largest revenue stream, expanded by 10.39% year-over-year (YoY) from $59.65 billion to $65.85 billion. The Magnificent 7 member’s accelerated AI spending also began to pay off, helping YouTube surpass projections with its $8.92 billion ad revenue.
Google Chief Business Officer Philipp Schindler credited the tech giant’s AI large language model (LLM) for the surprising growth. He stressed that Gemini has armed YouTube with the capability to recommend more relevant, organic, and personalized content to viewers.
Lastly, Alphabet’s cloud segment announced blowout revenues of $11.35 billion, up 34.96% YoY from $8.41 billion the year before. CEO Sundar Pichai attributed the spike to the division’s expanded AI offerings, including a diverse selection for enterprise customers.
AI Savings Boost Investor Confidence in Alphabet
This year, Alphabet invested billions in AI research and development, raising concerns about overspending and overcommitting to generative AI (GenAi). Pichai emphasized that in the past 18 months, Google trimmed the cost of answering GenAI search queries by over 90.00%.
At the same time, the tech giant also doubled the size of Gemini, the LLM powering the answer to AI queries. Pichai added that the skyrocketing cost-efficiency of the company’s GenAI solutions gives it a competitive advantage in the AI arms race.
Alphabet also ramped up investments in new forms of power, including nuclear, to power its future AI efforts. Also, Pichai revealed that over 25.00% of the company’s new computer code was AI-generated.