TradingKey - The earnings season for “Big Tech” in the US, for Q3 2024, is officially in full swing this week as a host of large technology companies – many part of the “Magnificent Seven” – post their latest numbers.
First up this week was search and advertising giant Alphabet Holdings Inc (NASDAQ: GOOGL), which released its much-anticipated Q2 2024 results on Tuesday (29 October) after the market closed.
For investors looking to the cash flow machines that are Big Tech companies, here are five key numbers to be aware of from Alphabet’s latest results.
Revenue of US$88.27 billion for the period
Alphabet beat expectations on the revenue front for Q3 2024 as the search giant posted sales of US$88.27 billion, up 15% year-on-year, and coming in nearly US$2 billion ahead of analysts’ expectations of US$86.39 billion.
Earnings per share (EPS) for the third quarter also increased, rising 37% year-on-year to US$2.12 – easily surpassing consensus market expectations of US$1.84.
Google Cloud revenue of US$11.35 billion
The much-watched Google Cloud division posted revenue of US$11.35 billion for Q3 2024, translating into a robust 35% year-on-year increase from the same quarter in 2023. That also easily came in ahead of consensus expectations for Google Cloud revenue of US$10.88 billion.
This was also an acceleration from the 29% year-on-year growth of Google Cloud’s revenue in Q2 2024 and highlights that it’s one of the fastest-growing (on a percentage basis) among the three large cloud providers.
Google search revenue rises 12.3%
Alphabet’s main revenue contributor and growth driver, Google search, also saw a positive quarter as the search business generated sales of US$49.4 billion – a 12.3% year-on-year increase. That suggests that generative AI – from the likes of ChatGPT – isn’t posing an existential threat to Alphabet’s search dominance just yet.
Alphabet’s overall advertising revenue hit US$65.85 billion for the quarter, up from the US$59.65 billion in the year-ago period. While this was a slowdown from the pace of expansion in Q2 2024, it is still continuing to grow.
YouTube revenue beats expectations
For investors, the shortfall of YouTube revenue in Q2 2024 was one reason why Alphabet shares fell. However, in Q3 2024, Alphabet posted YouTube ad revenue of US$8.92 billion, which was slightly ahead of expectations for US$8.89 billion.
The company also revealed during the earnings call that its AI language model – Gemini – is able to give YouTube the ability to better recommend more relevant and fresher personalised content to viewers.
AI reduces operating costs
The capital expenditure (capex) worries that many investors have with large cloud companies was addressed somewhat in Alphabet’s earnings call as CEO Sundar Pichai said that Google has been able to reduce the cost of producing AI answers in search queries by over 90% in the past 18 months.
That has come from a combination of improved hardware and engineering as well as doubling the size of its gen-AI model Gemini. Alphabet also plans to expand on its cost-cutting measures by using AI to optimise work flows, manage head count and make better use of the company’s physical footprint.
Investors will no doubt be happy to hear that as capex spend for Q3 2024 came in at US$13.06 billion, above estimates for US$12.66 billion and new CFO Anat Ashkenazi stated that capex spend in 2025 will be higher than 2024.
Overall, it was a solid quarter for Alphabet and its shares jumped as high as 6% in after-hours trading following the earnings release.