Google’s ad business beat expectations but Cloud miss knocks stock in after-hours trading

Google’s parent company Alphabet on Tuesday released its third quarter earnings which beat analysts’ financial estimates despite heavy investment in artificial intelligence (AI), but the company’s stock slid amid the performance of its cloud business.

Google’s financial performance beat analysts’ estimates for profit and sales, but analysts noted Google Cloud revenue grew 22.5% to $8.41 billion – down from 28% in the prior quarter and the unit’s slowest revenue growth since the first quarter of 2021 and lower than Wall Street’s estimate of $8.62 billion. The company’s stock was down about 6% in after hours trading on the news.

Alphabet Chief Financial Officer Ruth Porat was asked by FOX Business’s Susan Li about the company’s cloud division on Tuesday and Porat replied, “I think the only thing to point to is, again, we saw GCP (Cloud) revenue growth affected by some customer cost optimizations in the third quarter, and Google Workspace revenue growth was driven by a meaningful increase in average revenue per seat.”

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Google’s Q3 2023 earnings beat analysts’ estimates but a miss on cloud revenue caused its stock to slide after hours.

Google’s ad revenue beat expectations with a $59.65 billion haul compared to estimates of $59.12 billion. Porat touted the growth in Google’s advertising business both in web searches and on YouTube, which accounted for $7.95 billion in revenue for the quarter.

“I think that what you’re really seeing here with this ad revenue growth is the real resilience in search as well as a stabilization in YouTube ad revenues,” she said. “You’re seeing performance in search that was led by the retail vertical and then we’re really excited about what we’re seeing in YouTube ads, the acceleration and growth there is both from brand advertising and direct response.”

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Google’s advertising business is currently the focus of a federal antitrust lawsuit. The Dept. of Justice argues that Google engaged in anticompetitive behavior and subverted its…

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