Alphabet's AI Investments Propel Cloud Growth Amid Ad Market Shifts

Alphabet, Google's parent company, observed a significant 35% increase in its cloud business for Q3, influenced by AI investments and U.S. election-ad spend, boosting YouTube ad revenue. Despite competition, Google's cloud segment is thriving, demonstrating its vital role in the tech giant's revenue diversification amid shifts in the digital ad market.

Alphabet, the parent company of Google, reported a 35% increase in its cloud business for the third quarter, substantially influenced by AI investments and election-related spending that bolstered YouTube ad sales. On Tuesday, Alphabet's shares rose by nearly 6% in after-market trading, while Amazon and Microsoft saw a 1% increase each.

The tech giant surpassed third-quarter revenue expectations, with its Search and YouTube ad business increasing by 12%. Matt Britzman, a senior equity analyst at Hargreaves Lansdown, expressed that Alphabet's strong cloud growth supports the notion that major cloud providers are well-positioned for the AI revolution.

Despite facing stiff competition in the digital ad market and scrutiny from regulators, Alphabet is expanding its AI tools, like Gemini AI chatbot, and maintaining high investments in AI technologies. Though Google's ad revenue growth has slowed, its cloud revenue has reached $11.35 billion, highlighting a strategic shift in its revenue streams.

(With inputs from agencies.)