Google Cloud revenue doubles to $30.7bn, beating forecasts

Google Cloud more than doubled its revenue in the third quarter, beating analysts’ forecasts, Alphabet said on Wednesday. Weaker growth in search advertising, however, meant the group as a whole fell short of expectations.

Cloud revenue rose 103% from a year earlier to $30.7bn, according to Alphabet’s quarterly results. Analysts had expected $29.57bn, Reuters reported, citing LSEG data. The unit’s operating profit climbed to $11.1bn, from $3.6bn a year earlier.

Google Cloud is the world’s third-largest cloud provider, behind Amazon Web Services and Microsoft Azure. Use of its AI models is also growing.

Pichai said Google’s systems now process nearly 32 billion tokens a minute, more than four times the level a year ago. The Gemini app has about 1 billion users, he added.

Cloud customers have also signed up for much more work ahead. The unit’s backlog of contracted revenue reached $561bn, and Alphabet expects to recognise more than 55% of it within two years, according to Reuters.

“We had a strong quarter and are now on a half-trillion dollar revenue run rate,” said Sundar Pichai, Alphabet’s chief executive.

Alphabet’s total revenue grew 25% to $127.6bn, slightly below the $128.2bn analysts had forecast. Advertising brought in $82bn against expectations of $83.4bn, as more people used Google’s AI Mode in search, Reuters reported.

Spending on AI infrastructure also kept rising. Alphabet spent a record $51.4bn on property and equipment in the quarter, more than double a year earlier. As a result, its free cash flow was negative $9.1bn for a second straight quarter.

The company kept its forecast for this year’s capital spending at $195bn to $205bn, the range it set in July. Its finance chief said spending would rise significantly again in 2027 but gave no figure.

Net income fell 25% to $26.2bn, mainly because of an $8.7bn loss on equity investments. Alphabet shares dropped about 10% in after-hours trading.

Demand for Google’s own AI chips is also part of the cloud story. Earlier this week, The Information reported that OpenAI plans to buy Google’s TPUs.