🔎 Google: Little Engine That Cloud
Plus an update on antitrust trials and Waymo
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In case you missed it:
Alphabet (GOOG) just kicked off earnings season for Big Tech, doubling down on AI development across its product lineup with strategic team reorganizations.
☁️ And so far, the AI push is paying off. The Cloud division surged 35% year-over-year, surprising Wall Street analysts who had expected stable growth at 29%.
CEO Sundar Pichai recently shared with employees:
"AI moves faster than any technology before it. To keep increasing the pace of progress, we've been making shifts to simplify our structures along the way.”
Following this shift, the Gemini app team is now joining DeepMind for faster deployment, while the Assistant teams are moving to Platforms and Devices to integrate AI more deeply into products.
These changes come as Alphabet faces rising competition in Search and works to turn its substantial AI investments into revenue. With AI-powered features rolling out faster than ever, Alphabet is determined to lead in this supercycle.
Will these strategic shifts secure Alphabet’s lead in the AI race?
Let's visualize the quarter and dive into the latest report.
Today at a glance:
Alphabet Q3 FY24.
Antitrust, Cloud, and YouTube.
Key quotes from the earnings call.
Browser-based AI, Going Nuclear, and Waymo.
1. Alphabet Q3 FY24
Income statement:
Revenue grew +15% Y/Y to $88.3 billion ($2.0 billion beat).
🔎 Advertising: $65.9 billion (+10%, down from +11% in Q2).
Search: $49.4 billion (+12%).
YouTube ads: $8.9 billion (+12%).
Network: $7.5 billion (-2%).
📱 Subscriptions, platforms, and devices: $10.7 billion (+28%).
☁️ Cloud: $11.4 billion (+35%, accelerating from +29% in Q2).
Main highlights:
Gross margin was 59% (+2pp Y/Y).
Operating margin was 32% (+4pp Y/Y).
Services (Advertising & Other) was 40% (+5pp Y/Y).
Cloud was 17% (+14pp Y/Y).
Earnings per share (EPS) was $2.12 ($0.27 beat).
Cash flow:
Operating cash flow was $30.7 billion (35% margin, -5pp Y/Y).
Free cash flow was $17.6 billion (20% margin, -10pp Y/Y).
Balance sheet:
Cash, cash equivalent, and marketable securities: $111 billion.
Long-term debt: $13 billion.
So what to make of all this?