The Alphabet group, parent company of Google, is posting spectacular growth in the third quarter of 2023, driven by significant advances in the field of artificial intelligence and the cloud.
Growth powered by AI and cloud
Alphabet surpasses the expectations of the financial markets thanks to impressive results: a turnover of 88.3 billion dollars and a net profit of 26.3 billion, an increase of 34% over one year. According to CEO Sundar Pichai, this performance is largely based on advances in artificial intelligence (AI) and the dynamism of the cloud business. These technologies, deployed in flagship products like the Google search engine, the cloud and YouTube, are redefining Alphabet's business model.
Alphabet's massive investments in its technology infrastructure amounted to $13 billion last quarter. Anat Ashkenazi, the new financial director, confirmed that these expenses will continue to support the group's growth. These expenses, far from worrying the markets, caused an increase of more than 5% in Alphabet shares during after-hours trading.
Alphabet continues to innovate by introducing AI-based features into its products. Among them, the new AI Overviews tool, launched this week in more than 100 countries, allows users to ask Google questions to get detailed answers in a few paragraphs. According to Sundar Pichai, this tool attracts over a billion users per month, increasing engagement and query complexity. “ Users ask richer questions, explore more sites and discover new answers “, he said.
Advertising and cloud: solid pillars for Google
Alphabet's business model is also adapting to integrate advertising into these new interfaces. In the United States, the mobile version of AI Overviews now includes advertisements, a first for this platform. At the same time, Google has strengthened its visual search tools with Google Lens, enabling more than 20 billion monthly searches, providing advertising potential as users consider purchases.
Google's search engine and online advertising platform remain core to Alphabet's revenue. Although growth in this business slowed slightly to 10.4% in the third quarter, it remains strong, generating $65.9 billion. YouTube is also performing well, with advertising revenue of $8.9 billion, bolstered by subscriptions which contribute to annual revenue of $50 billion.
As for the cloud, it recorded impressive growth, with revenue of $11.4 billion for this quarter, an increase of 35% year-on-year. This sector, crucial for Alphabet, saw its margins improve and generated an operating profit of $1.9 billion. Sundar Pichai highlighted that Alphabet's AI solutions help attract new customers, strengthen relationships with existing customers and sign larger contracts.
Despite encouraging results, Alphabet remains behind its competitors Microsoft and Amazon in the cloud field, with respectively 37 and 25 billion dollars in revenue for these two giants. The race for first place in this sector therefore remains a major challenge for Alphabet.
