Alphabet's AI investments boost cloud sales, drive maturing ad business

Google parent Alphabet's its artificial intelligence investments are “paying off,” with a 35 percent surge in cloud computing business in the third quarter.

Alphabet was the first major tech company to report earnings, and it didn't disappoint. “Strong growth in cloud computing ...... This continues to support the argument that major cloud providers are well positioned to benefit from the AI revolution. Google, which is seen as slow to catch up with big tech rival Microsoft in the AI race, has been beefing up its Gemini AI chatbot and improving its AI-powered search. The company also continues to spend heavily on AI. 2025 Alphabet's capital spending will be higher than this year. In the third quarter, Alphabet's capital expenditures rose 62 percent to $13 billion. She said she expects the fourth quarter to be similar.

Alphabet's impressive quarter could see its small but growing cloud computing business slowly replace its slowing advertising business.

Google's longtime dominance of the digital ad market is being threatened by Amazon and TikTok, which are favored by advertisers looking for ready-made buyers. Google's search business is also facing scrutiny from regulators who are trying to break it up.

Google has rolled out ads in its AI overview, which uses generative AI to summarize content from a variety of sources and display concise results for search queries. Users see the company's new AI tool as more effective than before - a big improvement from earlier this year, when the feature drew harsh criticism for showing inaccurate answers, including a pizza recipe that listed glue as an ingredient. The company's early smartphone launch this year helped boost revenue.