A rebound in digital advertising led to a rise in revenue and profits for Alphabet, Google’s parent company, but investors were disappointed by its cloud computing business, which lags far behind those of rivals Microsoft and Amazon. .
Alphabet reported $76.7 billion in quarterly sales, up 11 percent from a year earlier, and roughly in line with analysts’ estimate of $76 billion, according to data compiled by FactSet.
The internet giant said its profits rose 42 percent to $19.7 billion, beating Wall Street expectations of $18.5 billion.
“Investors were disappointed by the relatively weak performance of its Google Cloud platform, which risks falling further behind,” Microsoft Azure and Amazon Web Services analyst Jesse Cohen, investment.com analyst, wrote in a note.
Alphabet’s stock price fell more than 5 percent in after-hours trading Tuesday evening.
Google has been focusing on generative artificial intelligence, the technology that made waves when OpenAI launched ai chatbot ChatGPT last November. Google said in July that it would invest more resources in developing that technology while cutting other expenses. In the last month, Google has laid off hundreds of its recruiters and reorganized other parts of the company.
As of Sept. 30, the company had 182,381 employees, compared to about 119,000 at the end of 2019. Like other tech companies, Alphabet overused its hiring during the pandemic and began undoing those habits in January, when it cut the 6 percent of its employees. its workforce, or 12,000 employees.
Google Cloud, the company’s division that provides software and technology services to other businesses, saw sales rise 22 percent to $8.4 billion. Analysts, however, had estimated $8.6 billion. Google has invested in making its cloud division a destination for artificial intelligence software, and the quarter’s performance disappointed investors who had hoped ai could be a launching pad for the unit. The division posted a profit of $266 million in the third quarter.
Google’s quarterly performance contrasted with results also announced Tuesday by Microsoft, which far exceeded expectations.
Revenue from Google’s search engine and related services, its biggest business, rose 11 percent to $44 billion in the second quarter, narrowly beating analysts’ estimate of $43.3 billion.
Advertising sales on YouTube, Google’s video platform, rose 12 percent to $7.95 billion, just above the $7.8 billion expected by analysts.
