Investment Insights - Google (Alphabet) Results

Alphabet Inc. reported its latest quarterly results last week, with strong growth across revenue, profits, and its key business segments. The market reacted positively, with the share price rising sharply following the announcement. This continues a pattern across the last four to five quarters.

The key numbers (compared to the same quarter last year)

• Revenue rose 22% to $109.9 billion

• Net income rose 81% to $62.6 billion

• Earnings per share rose 82% to $5.11

• Google Search revenue rose 19% to $60.4 billion

• YouTube advertising revenue rose 11% to $9.9 billion

• Google Cloud revenue rose 63% to $20.0 billion

The first key takeaway: the strength of Google Cloud

Cloud growth has accelerated significantly over the last year. Around a year ago, Cloud was growing at roughly 30%. Last quarter it was closer to 48%, and this quarter it exceeded 60%.

That is a substantial growth rate for a business already generating around $20 billion per quarter. It also means Cloud is growing materially faster than Google's core Search business.

The second key takeaway: the continued strength of Google Search

There have been major concerns that AI tools could weaken Google's core business. However, Search revenue is still growing at a healthy rate. At this stage, the business is not shrinking. It continues to expand despite increased competition.

Google's business mix is changing

Historically, Alphabet was viewed as being heavily dependent on Search. That is gradually changing.

Cloud is now a large and fast-growing part of the business, and if it continues to grow faster than Search over time, it will become an increasingly important contributor to overall revenue. This matters because it reduces reliance on any single part of the business.

Alongside YouTube and other services, Alphabet today is a more diversified business than it was several years ago.

Another important point: the cloud backlog

One of the more significant figures from the update was the size of Google Cloud's backlog, which is now around $460 billion.

A backlog represents contracted future revenue. Customers have already committed to spending this money, but the revenue will be recognised over future years as services are delivered. It suggests that the large amounts of capital being invested into AI infrastructure are already translating into real customer demand and future revenue.

Final thoughts

This was a strong quarter, and not an isolated one. The last four to five earnings announcements have also been positive, which has driven a significant recovery in Alphabet's share price over the last 18 months.

Cloud growth is accelerating, Search continues to grow despite AI concerns, and the company's AI investment is increasingly showing up in the numbers.

For clients invested in Alphabet, it is encouraging to see the business performing well across both its core operations and its newer growth areas.