Driven by the breakneck growth of its remote (cloud) computing business and the appetite for artificial intelligence (AI), Google’s parent company, Alphabet, largely exceeded market expectations in the third quarter of 2024. Net profit stood at $26.3 billion, a jump of 34% over one year, according to a press release published Tuesday, October 29. Reported per share, a benchmark indicator for Wall Street, it reached $2.12, significantly above the $1.84 anticipated by analysts.
The cloud boom
The increase in profit is significantly faster than that of turnover (+ 15%), in particular thanks to an improvement in the profitability of the “cloud”, whose operating profit has been multiplied by more than seven. This exceptional performance is reassuring the market, after two years of massive investments by Google in the cloud and AI. “In the cloud, our AI solutions drive the adoption of artificial intelligence by our existing customers, attract new ones and enable us to win larger contracts,” said CEO Sundar Pichai. In just four years, the weight of the “cloud” in Alphabet’s turnover has increased from 7% to 13%.
Google has established itself, alongside Amazon and Microsoft, as one of the very first players in remote computing, offering considerable hosting and data processing capabilities to corporate clients. It is a new growth engine for the Californian group, which has built its empire on search engines and online advertising.
90% reduction in the cost of an AI query
“It seems that Alphabet’s offering is much better suited to this phase of AI growth than during the previous wave during which Amazon’s AWS and Microsoft’s Azure fared better,” judges in a note, Matt Britzman, of Hargreaves Lansdown. “We are looking to invest in AI and other growth areas while being disciplined on costs,” confirmed new CFO Anat Ashkenazi during the earnings conference call.
This week, the group deployed its AI Overviews solution, which allows you to ask Google questions and get a few paragraphs in response, in more than 100 countries. “This represents more than a billion users per month,” assured Sundar Pichai. A new search tool now monetized by the deployment of advertisements in the American version of IA Overview. AI also now offers the “Circle to Search” solution, which allows you to identify objects or translate text from a photo, or to point your camera at an object that you want to Google. This allows the company to offer advertisements corresponding, for example, to the products present in the photo.
Thanks to more efficient hardware, but also to innovations, Google managed to reduce the average cost of a query by 90% for its generative AI product Overviews, indicated Sundar Pichai during the presentation of the results. AI Overviews is a feature integrated into the Google search engine that offers a written result for a query and not just links as was the case until now. Although it does not show the insolent progression of the “cloud”, the search engine activity remains well oriented (+ 12%), as does the YouTube video platform (also + 12%).
Google still threatened by justice
Geographically, the United States is the most dynamic region (+19%), even if all the group’s regions of operation are on the rise. In total, turnover stands at $88.3 billion, or 15% better than last year at the same time. Wall Street reacted well to this publication. Alphabet shares gained more than 5% in electronic trading after the close of the New York market.
“Google’s results show that it can stand out despite the serious threats weighing on its advertising activity,” also comments Evelyn Mitchell-Wolff, of the Emarketer firm. Google was found guilty in early August of anti-competitive practices in the management and promotion of its famous search engine. At the beginning of October, the US Department of Justice suggested several avenues to the federal judge responsible for determining Google’s sentence, notably mentioning a possible dismantling of the group.