Google ad revenue hits a record $65.85bn

Alphabet, Google’s parent company has released its third-quarter earnings report. The company grew significantly in advertising, AI, and cloud services. It surpassed Wall Street's expectations with record profits and sales.

Revenue and profits

Alphabet reported a huge $88.3 billion in revenue this quarter, with $65.9 billion coming from Google’s core advertising business. This is the company’s highest sales figure to date, surpassing the $86.3 billion from Q4 2023. Earnings per share hit $2.12, while net income was $26.3 billion, beating analysts' predictions of $1.85 per share.

Google’s ad revenue

Google's advertising revenue reached a record $65.85 billion, up 10% from last year’s $59.65 billion. This marks the highest ad revenue Google has ever posted in a single quarter. Alphabet’s CFO, Anat Ashkenazi, highlighted search as a major growth contributor, with AI-driven efficiencies reducing costs per query by over 90%. This quarter's ad revenue surpassed Google’s previous record in Q4 2023 by a margin of 0.5%, establishing it as Google’s highest ad revenue quarter.

Google’s search business

Search revenue contributed the most, increasing 12% year-over-year to reach $49.39 billion. According to Ashkenazi, the search engine remains a vital source of revenue for Alphabet. 

Alphabet’s CEO, Sundar Pichai, said that machine costs per query have dropped by over 90% in the past 18 months. The company's custom Gemini AI model has doubled in size, due to ongoing cost-saving measures, he added.

Cloud revenue growth

Google Cloud also had a strong quarter, bringing in $11.35 billion, a 35% increase from last year and above the $10.86 billion analysts expected. Pichai said that AI services, especially enterprise subscriptions, drove growth in cloud revenue. "Our technology leadership and AI portfolio are helping us attract new customers, win larger deals, and drive deeper product adoption with existing customers," Pichai said.

YouTube advertising

For the first time, YouTube’s combined ad and subscription revenue over the last four quarters topped $50 billion. In Q3, YouTube advertising brought in $8.92 billion, above expectations of $8.89 billion.

The Q3 results show Google's growing power despite regulatory issues. In August, a U.S. court ruled that Google holds an illegal monopoly on search, a significant case that could impact its core revenue source. 

The DOJ has proposed potential remedies, including a possible breakup of Google’s business. Google has called these proposals “radical and sweeping.” Pichai said the company plans to “vigorously defend these cases.” He warned that such measures could have "unintended consequences, especially for the dynamic tech sector and American leadership."

Google also faces another antitrust case related to its ad tech business. Despite these challenges, the company continues to roll out new features and updates. Recently, Google expanded its AI Overviews to over 100 countries, with CEO Sundar Pichai noting strong engagement and positive user feedback for this feature.

Google has enhanced its Performance Max campaigns with more campaign tools and is testing video shopping ads in search results. Another new ad format in testing allows users to expand or collapse sponsored search ads.