Google's moneymaking machine still pumping out massive profits despite
multiple threats
Send a link to a friend
[October 30, 2024] By
MICHAEL LIEDTKE
SAN FRANCISCO (AP) — Google is still thriving while the company
navigates through a pivotal shift to artificial intelligence and battles
regulators trying to topple its internet empire.
The latest evidence of Google’s prosperity emerged Tuesday with the
release of its corporate parent Alphabet Inc.’s results for the
July-September period. Both Alphabet’s profit and revenue increased at a
brisker pace than industry analysts anticipated, thanks primarily to a
moneymaking machine powered by Google’s ubiquitous search engine.
Alphabet earned $26.3 billion, or $2.12 per share during the most recent
quarter, a 34% increase from a year ago. Revenue rose 15% from the same
time last year to $88.27 billion.
“Our commitment to innovation as well as the long-term focus and
investment in AI are paying off,” Alphabet CEO Sundar Pichai said during
a call discussing the results.
The profits would have been even higher if Google wasn’t pouring so much
money into building up its AI arsenal in a technological arms race that
includes other industry heavyweights Microsoft, Amazon, Apple, Facebook
parent Meta Platforms and rising star OpenAI. The AI investments are the
primary reason Google’s capital expenditures in the past quarter soared
62% from the same time last year to $13.1 billion.
The AI spending will likely stay at roughly the same level during the
current October-December period, and the rise even higher next year,
according to Anat Ashkenazi, Alphabet's chief financial officer. But
Ashkenazi also emphasized the Mountain View, California, company will
act on cost-cutting opportunities in other areas to help boost profits.
Alphabet already has trimmed its payroll from more than 190,000
worldwide employees early last year to about 181,000 workers now.
In an example of how AI can perform tasks that once required human
brainpower, Pichai said the technology is now writing more than 25% of
the company's new computer coding.
Investors seemed pleased with the both the performance and what they
heard from company executives. Alphabet's stock price climbed 5% in
extended trading after the numbers came out and the conference call was
completed.
Investing.com analyst Thomas Monteiro said Alphabet's showing makes it
likely more good news will be coming for Big Tech as this week
progresses, with quarterly reports from Microsoft, Meta, Amazon and
Apple still to come in the days ahead.
[to top of second column] |
Audience members gather at Made By Google for new product
announcements at Google on Aug. 13, 2024, in Mountain View, Calif.
(AP Photo/Juliana Yamada, File)
But a 4-year-old antitrust case
brought by the U.S. Department of Justice has cast a cloud of
uncertainty over Google’s future.
After weighing the evidence presented during a high-profile trial
last year, a federal judge declared Google’s search engine is an
illegal monopoly — a decision that has opened the door for a major
shake-up. Earlier this month, the Justice Department suggested it
might seek to break up Google as part of penalties that will be
determined by U.S. District Judge Amit Mehta next summer.
Besides the legal assault on its search engine,
Google also has been ordered to tear down the barriers protecting
its Play Store for Android smartphone apps. That ruling came earlier
this month after a jury decided that operation also was an illegal
monopoly. Google is also nearing the end of another antitrust trial
in Virginia revolving around the technology underlying its digital
ad network.
As if the regulatory headaches aren’t enough, Google is also in the
midst of a major makeover of its search engine that is putting an
increasing emphasis on highlight results produced by artificial
intelligence in response to competitive threats to alternative
options relying on the same potentially revolutionary technology.
For now, at least, Google remains a juggernaut.
The digital ads tied to Google’s search engine remained the
financial cornerstone. Revenue from that segment climbed 12% from a
year ago to $49.39 billion. And Google’s cloud division is growing
at an even more robust rate, thanks to demand for AI services. The
cloud division generated $11.35 billion in revenue during the past
quarter, a 35% increase from last year.
But the regulatory questions dogging Google remain a worry among
investors. Although Alphabet’s shares have surged by more than 20%
so far this year, Tuesday’s closing price of $169.68 remains well
below their high of nearly $192 reached in July before the search
engine monopoly ruling came out.
All contents © copyright 2024 Associated Press. All rights reserved
|