Alphabet Shares Surge on Wall Street Following Stronger-Than-Expected Earnings: The Impact of AI and Google Cloud

Alphabet Shares Surge Nearly 6% on Wall Street Following Q3 2024 Earnings Announcement

Alphabet, the parent company of Google, saw its stock price rise by nearly 6% in afterhours trading on Wall Street, following the release of its third-quarter earnings for 2024.
The company reported a net income of $26.3 billion, translating to earnings of $2.12 per share, a substantial increase from last year’s figures of $19.7 billion or $1.55 per share for the same quarter.

The earnings per share (EPS) at $2.12 exceeded the analysts’ expectations of $1.85, as forecasted by LSEG.
Additionally, Alphabet’s revenue rose by an impressive 15% year-over-year, reaching $88.27 billion—greater than the $86.30 billion anticipated by LSEG analysts.

Impact of Google Cloud and YouTube Advertising Revenues

The significant revenue growth can be attributed to the surge in business from Google Cloud, which reported an astonishing nearly 35% increase in revenue, driven by the uptick in artificial intelligence applications embraced by numerous businesses.
Google Cloud’s revenues amounted to $11.35 billion, outperforming expectations of $10.88 billion set by StreetAccount.

Looking at other key revenue streams, YouTube’s advertising revenues were $8.92 billion, slightly below expectations of $8.89 billion, while the traffic acquisition costs stood at $13.72 billion, higher than the anticipated $13.53 billion.
During the earnings call, CEO Sundar Pichai emphasized that Google’s AI product offerings are utilized by billions of users, creating a “virtuous cycle” of growth.

Google Search Business Retains Dominance

The Google search engine business generated revenue of $49.4 billion, marking a 12.3% increase year-over-year, which continues to make it the largest contributor to Alphabet’s revenue growth, as highlighted by CFO Anat Ashkenazi during the call.

Overall, Alphabet’s advertising revenues rose to $65.85 billion, up from $59.65 billion in Q3 2023, indicating steady growth in the advertising sector, albeit at a slower pace compared to Q2 2024.
Philipp Schindler, the head of Google and YouTube sales, remarked on the role of AI in enhancing YouTube’s recommendation algorithms.
The language model Gemini has allowed YouTube to offer more relevant, fresh, and personalized content suggestions for users.

Following the release of these promising financial results, Alphabet’s stock experienced a rally of up to 6% in afterhours trading, building on a previous closing increase of 1.78%, bringing the stock price to $169.68.

For more insights, read about the potential impact of Google’s stock split as mandated by the U.S.
government.

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