Despite a year-on-year increase of 103% in cloud business revenue, the stock price still fell before the market opened.
Google Cloud's sales soared this quarter, but its parent company, Alphabet ( Alphabet ), saw overall revenue growth of only 25%, which was lower than market expectations and amounted to $127.6 billion, disappointing investors.
The company achieved growth in operating profit in the third quarter, but net profit declined by nearly a quarter to $26.2 billion. Data from Standard & Poor's Capital IQ shows that this figure is far below analysts' consensus expectations. Part of the profit decline came from a loss of $8.7 billion on equity securities holdings, which previously generated substantial gains in the second quarter of this year. Chief Financial Officer Anat Ashkenazi stated during the earnings conference call that the loss was mainly due to the SpaceX stock price falling in the third quarter, and Google is an important investor in SpaceX.
The stock price tumbled nearly 9% in front of the alphanumeric dial.
Google disclosed on Wednesday that driven by the demands of AI customers, Google Cloud's revenue in the third quarter more than doubled year-on-year, reaching $30.7 billion; the sales of its self-developed tensor processing unit (TPU) AI chips also contributed significantly to the revenue growth.
As previously reported by The Information, Google has reached an agreement to sell TPU chips to OpenAI. On the same day, Google also announced a partnership with Oracle, which will be responsible for supplying this AI chip to the market. Ashkenazi stated that sales of TPU devices are expected to continue to grow this quarter and are set to see a significant increase in scale by 2027.
Ashkenazi also mentioned that the cloud business has a backlog of orders amounting to 561 billion US dollars, which is higher than the 514 billion US dollars from the previous quarter.
Alphabet CEO Sundar Pichai stated during a financial report conference call that the company will launch the AI service for general users later this year.
Google's largest segment, "Google Services Business" (which includes its core search advertising business), saw growth of less than 11% this quarter, the lowest growth rate since the first quarter of last year. Google's Chief Commercial Officer, Philip Schindler, stated that the monetization efficiency of ads within the AI search engine is not as good as that of traditional ads.
Affected by Google's substantial investments in the AI data centers, the company's free cash flow is negative, with a shortfall of over $9 billion. This is already the second consecutive quarter with negative free cash flow, and the deficit has significantly increased from $5.9 billion in the previous quarter.
Ashkenazi stated that Google expects its capital expenditures to continue to increase significantly next year.
Earlier today, Google released a brand-new large model, Gemini 4 Carbon. Officials claim that the capabilities of this model are significantly stronger than those of the previous generation model, Argon, which was released less than a month ago.
Responsible Editor: Guo Mingyu
