Alphabet's Impressive Cloud Sales Signal Growth for Amazon and Microsoft

Alphabet's Impressive Cloud Sales Signal Growth for Amazon and Microsoft

Google-parent Alphabet has reported remarkable growth in its cloud sales for the July-September quarter indicating a positive outlook for major cloud providers Microsoft and Amazon. The surge in cloud revenue highlights the increasing demand for AI-enhanced computing power across the industry.

In a significant development Alphabet's stock rose by 5.5% in premarket trading following a remarkable 35% increase in Google Cloud revenue marking the fastest growth rate the company has experienced in the last eight quarters. This figure surpassed analysts' expectations of a 29% increase as per LSEG.

In addition to its cloud success Alphabet's core advertising sales grew by 10% further solidifying the company's strong financial position. Angelo Zino a senior equity analyst at CFRA Research remarked on the forthcoming reports from Microsoft and Amazon stating that Google is likely to showcase the most impressive cloud growth figures among the three major players this quarter.

Despite Google Cloud being smaller compared to its competitors it represented 13% of Alphabet's total sales for the third quarter compared to 11% a year prior. For context Amazon's cloud division AWS accounted for 18% of its revenue in the prior quarter while Microsoft's Intelligent Cloud segment which includes Azure contributed 44% to its overall revenue.

The continued growth of Google Cloud this quarter underscores the company's advancements in AI capabilities which are increasingly recognized by organizations choosing to partner with Google. Bob O'Donnell president and chief analyst at TECHnalysis Research emphasized that this ongoing growth signifies a broader acceptance of Google's AI-driven services.

This marks the fourth consecutive quarter of growth acceleration for Google Cloud following a period of slowed growth. Alphabet attributed the previous slowdown to "customer optimization efforts" indicating a strategy to streamline operations.

While Google Cloud currently has less AI capacity than its rivals the company has distinguished itself through its advanced Tensor Processing Units which are custom chips designed for AI tasks. Analysts believe that Google's improved security measures and tailored AI offerings have attracted more customers helping it stand out from Azure and AWS.

In line with its competitors Alphabet has heavily invested in AI initiatives. These efforts aim to enhance its Search capabilities to better compete with Microsoft-backed OpenAI while also allocating substantial resources to expand its cloud infrastructure with plans to invest billions in new data centers globally.

Google has recently integrated its generative AI chatbot Gemini into its cloud services offering clients a range of features including AI-driven code generation data processing and enhanced cybersecurity threat intelligence. This comprehensive approach has led to increased customer spending on its AI services including the Vertex AI platform which allows businesses to utilize Google's models and develop custom solutions.

New finance chief Anat Ashkenazi who succeeded Ruth Porat has indicated that Alphabet's capital expenditures are expected to exceed this year's figures by 2025. Analysts including Gil Luria head of technology research at D.A. Davidson noted that the significant acceleration and margin expansion in Google Cloud exceeded expectations showcasing the company's ability to transform its AI capabilities into tangible revenue growth.Alphabet cloud salesAlphabet cloud sales