Alphabet (GOOGL.US) faced a very difficult challenge given the high expectations set by the market. Nevertheless, the company managed to report strong results for the third quarter, surpassing consensus market forecasts in key areas, thereby maintaining robust revenue growth dynamics. The Cloud segment, in particular, delivered a positive surprise and continues to be the most closely watched component of the company's revenue. In after-hours trading, the company's stock jumped by over 4% in the initial reaction to the results.
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Open account Try demo Download mobile app Download mobile appThe company achieved $88.27 billion in revenue, representing a growth rate of 15.1% and a 2.11% higher than forecasted. Even after adjusting for payouts to partners who direct customers to the Google environment, revenues remained strong at $74.6 billion (compared to the forecasted $72.9 billion).
The company also maintained excellent cost discipline, resulting in a 33.7% year-over-year increase in operating profit to $28.52 billion (compared to $26.67 billion the previous year). This translated into a record operating margin of 32%. This marks the third consecutive quarter that the company has maintained an operating margin above 30%.
Alphabet also performed exceptionally well at the adj. EPS level, which for Q3 2024 amounted to $2.12, significantly exceeding the forecasted $1.84.
Key data for Q3 2024 (in billions of dollars, except for adjusted earnings per share). Source: XTB Research, Bloomberg Finance L.P.
Among the individual segments, the company delivered solid sales dynamics in its core areas. Maintaining high growth rates in segments based on advertising revenues (particularly the YouTube and Google Search segments) allowed the company to mitigate one of the biggest concerns investors might have had for this quarter's results. AI is one of the company's leading growth drivers, and with the increasing development of generative artificial intelligence, there is significant potential for revenue generation in the company's flagship market segment, search.
Nevertheless, Alphabet demonstrated that its AI-driven solutions, which enhance search and the use of the company's technologies, not only improve customer experience but also sustain high, double-digit revenue growth rates. Alphabet's CEO announced that the company is still at the beginning of its journey to introduce more new solutions and improvements in this crucial segment.
Revenue breakdown by segments. Source: XTB Research, Bloomberg Finance L.P.
For YouTube segment, the total value from both advertising and subscriptions over the past four quarters exceeded $50 billion for the first time in history. This segment, particularly in areas like YouTube Music Premium, YouTube TV, and NFL Sunday Ticket, is leading the growth in subscription revenues.
In the Google Cloud segment, the company significantly accelerated its revenue growth to nearly 35% year-over-year. This figure is well above forecasts and indicates Alphabet's strengthening position in a market where it competes heavily with Amazon and Microsoft.
Operating income breakdown by segments. Source: XTB Research, Bloomberg Finance L.P.
In conclusion, the company's results for Q3 2024 indicate not only the maintenance of strong growth dynamics in key segments but also the dynamic development of the company in the rapidly evolving AI market. This translates to Alphabet maintaining a leading position in the technological race.
The company's stock is up over 4% in after-hours trading. However, the change is still lower than what was priced in by the options market during the session preceding the earnings release. The implied change indicates a level of $180. Source: xStation
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