Alphabet, the parent company of Google and YouTube, announced impressive earnings on Tuesday, marking its third consecutive quarter of better-than-expected financial results. The tech giant reported significant growth in digital advertising and a rising demand for Google Cloud services, with shares climbing in after-hours trading.
CEO Sundar Pichai expressed enthusiasm about the company's momentum, stating, “Our commitment to innovation, as well as our long-term focus and investment in AI, are paying off with consumers and partners benefiting from our AI tools.”
Analysts had anticipated a 12% year-over-year revenue growth to approximately $86.23 billion, along with earnings per share of $1.85. However, Alphabet outperformed expectations with a reported revenue of $88.27 billion, reflecting a 15% increase, and earnings per share of $2.12. Advertising revenue saw a 10% increase, while cloud services surged by 35%. Pichai highlighted notable growth at YouTube, both in advertising and subscriptions, which also surpassed analyst projections.
The company’s strong performance has been bolstered by growing enthusiasm for its artificial intelligence products. Google’s stock price has risen by 20% in 2024 and has more than doubled over the past five years. Despite its achievements, Google faces scrutiny as it competes with AI leader OpenAI, which has partnered closely with Microsoft. When asked about perceptions of being slightly behind competitors, Pichai likened Google to a neural network, emphasizing the company’s ongoing efforts to innovate.
However, this growth comes with increased spending, as Google’s capital expenditures rose 62% year-over-year to $13 billion. The company expects these expenses to remain at this level in the coming quarter and to increase further in 2025.
Despite the positive financial results, Alphabet has encountered significant legal hurdles in 2024. This earnings report is the first following a major antitrust ruling against the company by the US government. The judge's decision declared Google an illegal monopoly, and the Department of Justice (DoJ) is considering breaking up the company or undoing multibillion-dollar agreements deemed anticompetitive.
Addressing the ongoing antitrust litigation, Pichai remarked, “Some of the early proposals from the DoJ have been far-reaching, and I think they could have unintended consequences for the dynamic tech sector and American leadership there. We plan to engage very vigorously there.”
Additionally, Google is required to revise its Play Store practices as a result of another antitrust case involving Epic Games. This ruling mandates that Android apps be accessible from competing sources and prohibits the company from restricting alternative in-app payment methods.
Another antitrust trial is currently underway, with the US Justice Department alleging that Google has established an illegal monopoly in online advertising.
On a different note, Google’s self-driving car division, Waymo, continues to expand its operations, currently offering approximately 150,000 paid rides per day in various US cities. The same day as the earnings announcement, Waymo revealed it had raised $5.6 billion in funding from its parent company and external investors. Although the self-driving car segment is not a major revenue source compared to advertising, Pichai noted its significant growth potential and the increasing pace of establishing operations in new cities.
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