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Resilient advertising revenues helped Google parent Alphabet surpass expectations for sales in the third quarter, though a weaker than expected performance in its cloud computing division disappointed investors.
Google’s Cloud division, which turned its first-ever operating profit this year, narrowly missed revenue forecasts, rising 22 per cent to $8.4bn compared to expectations for a gain of about 26 per cent. While the unit remained profitable in the three months to September 30, operating income was lower than in the second quarter of the year.
However, Alphabet’s overall revenue surpassed expectations, rising 11 per cent to $76.7bn. Earnings per share also beat forecasts, jumping 46 per cent to $1.55, with post-tax income rising 42 per cent to $19.7bn.
Shares fell 6 per cent in after-hours trading in New York.
Sundar Pichai, Alphabet and Google chief executive, said: “I’m pleased with our financial results and our product momentum this quarter.”
Alphabet earnings have shown resilience despite a more challenging start to the year that resulted in significant lay-offs. Alphabet axed 12,000 staff in January and confirmed a smaller number of additional cuts in the Google News team this month
Despite efforts among Big Tech companies to rein in spending, the groups have also been racing to develop, deploy and monetise generative AI. From the start of the year through September 30, Alphabet’s spending on research and development rose 14 per cent to $33.3bn.
Pichai said that the company was making “exciting progress” on AI, “and lots more to come”.
Investors are also closely monitoring when the slowdown in cloud growth — as companies have sought to cut costs — will bottom out, and what impact tighter enterprise budgets will continue to have on cloud providers including Google and Amazon Web Services.
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