Alphabet felt the painful comeuppance of years of antitrust penalties, publisher enmity and customer blowback as it reported a serious blow to revenu…
Lol. Can you imagine?
Alphabet reported on Wednesday that its total Q3 revenue was $102.3 billion, up 16% year over year, while net profit increased by a third to $35 billion.
There was one underperformer across Google’s 13 billion-dollar business lines, CEO Sundar Pichai noted in the company’s opening remarks to investors. Google Search, YouTube Ads, Google Subscriptions, Google Cloud, Google Devices and Google Services revenues were all up by double-digit percentages. But the Google Network segment, which is the company’s breakout for publisher earnings in its web-wide ad network, decreased by almost $200 million, and totaled nearly $7.4 billion in Q3.
The landmark DOJ v. Google Search antitrust ruling that was handed down this quarter was not mentioned on the call. Nor was the DOJ’s case against Google’s publisher ad tech monopoly, which was declared an illegal monopoly in April and is headed for closing arguments in a few weeks.
The term “AI” came up more than 90 times, not to mention another 15 mentions of “agents” and “agentic” solutions. Eight investors got in questions during the earnings, each of whom focused their question(s) on various AI products, mainly regarding search AI Overviews and Gemini.
Not just AI
Agentic AI tech is center stage, but there are other exciting opportunities for meaningful revenue growth and monetization potential, even by Google standards.
One such example is Waymo. The self-driving car service is pretty cool, but at what point does that business get more fully integrated into the core Google platform?
Waymo has great data that might be incorporated into Google’s core identity graph, like “What hotel I’m staying at, what airport I’m staying at,” Morgan Stanley Managing Director Brian Nowak said.
The consolidation of Waymo data on the back end may not be so far off.
“I was reflecting on the exact same topic,” Pichai said. “I’m scheduled to meet with the team to do a review on it in a few weeks.”
He added that incorporating YouTube (and its ad model) into the Waymo experience could be an example.
YouTube itself is another growth engine. The video hub made $10.3 billion in ad revenue in Q3, which is what many consider the main takeaway. But YouTube’s subscription businesses combined (YouTube Premium and YouTube Music) are larger and growing at a higher rate, totaling $12.9 billion in Q3.
“On average, a YouTube Music and Premium subscriber generates a meaningful higher gross profit than if they were simply an ad-supported user,” Pichai said.
Back to the main event
There may be interesting pieces outside of Google’s AI services. But really who can be bothered?
Waymo’s potential incorporation into the Google borg, and the new paid media opportunities that come with it, is enticing, but hypothetical and marginal for a company that earned more than $100 billion in a quarter.
One thing driving real bottom-line growth right now is the fact that Google Cloud signed more billion-dollar commitment deals in Q3 of this year than the company had in the prior two years combined, as Pichai noted.
And even within the ad business, the big growth drivers tend to be AI-generated, so to speak. AI Max, Google’s AI-based product for search advertising, serves ads across more channels and tends to bid for keywords that the advertiser would not otherwise have targeted.
AI Max has also “unlocked billions of net-new queries by delivering the most relevant ad across surfaces and matching advertisers against additional queries they weren’t reaching before,” said Google Chief Business Officer Philipp Schindler.
After all, many Google searches return no ads because there is no perceived commercial value to the search. AI is putting ads in more of those places.
Publishers have been venting steam like active volcanoes over Google’s AI Overviews and AI Mode leeching away their traffic and monetization. As with the DOJ antitrust suits, this topic did not come up.
Which is apparently news to Google. That or Google may not consider its network of web publishers as part of the equation, really.
“AI overviews are scaling up and working for our entire user base,” Pichai said.
