Google Cloud revenue soars 35% on AI demand

The company attributes this success to its advancements in AI technology, including its Tensor Processing Units and the integration of AI chatbot Gemini into its cloud services.
AI spending remains a priority for Alphabet, but competition is increasing.

Alphabet’s recent earnings report showcases a robust 35% surge in Google Cloud revenue for the third quarter, signalling a strong demand for AI-driven cloud computing and setting a promising tone for competitors Microsoft and Amazon. The jump, the fastest pace of growth in two years, has sent Alphabet’s shares up by 5.5%, reflecting investor optimism about the company’s expanding foothold in the cloud sector. Analysts had anticipated growth of around 29%, making this an even stronger-than-expected outcome for Google’s cloud division.

While Alphabet’s cloud segment remains smaller than Amazon’s AWS and Microsoft’s Azure, its performance has been noteworthy, accounting for 13% of Alphabet’s third-quarter revenue, up from 11% a year prior. This consistent growth aligns with Google’s continued investment in AI-powered tools and custom chips, like the Tensor Processing Unit (TPU), which have set it apart from competitors by enhancing cloud capabilities for AI applications. Analysts like Angelo Zino of CFRA Research believe Google may deliver the most impressive cloud growth numbers this quarter.

Google has been pouring resources into AI advancements across its cloud and search businesses, including its chatbot Gemini, which offers AI-generated code, data processing, and cybersecurity tools. These innovations, combined with the Vertex AI platform that enables custom model creation, have made Google Cloud a compelling choice for organisations seeking advanced AI solutions.

Investments in AI are also fueling Alphabet’s core advertising business, which rose 10% in the quarter, and supporting its broader cloud infrastructure expansion. Google has announced plans to invest billions in new data centres worldwide to strengthen its market presence and technological capabilities.

In its latest earnings call, Alphabet’s new CFO, Anat Ashkenazi, confirmed that capital expenditures in 2025 are expected to surpass this year’s, underlining the company’s commitment to scaling its AI and cloud capabilities. Analysts like Gil Luria of D.A. Davidson emphasise that Google Cloud’s outstanding performance in recent quarters showcases Alphabet’s success in turning AI investments into substantial revenue growth, solidifying its position in a competitive market.