Alphabet Q3 revenue rises 25% on Google Cloud growth

Alphabet Inc. (GOOGL) said on Oct. 28 that revenue for the quarter ended Sept. 30 rose 25% from a year earlier to $127.6 billion. Growth was led by Google Cloud, where revenue more than doubled in percentage terms, rising 103% to $30.7 billion.

Operating income rose 30% to $40.6 billion, and the operating margin was 31.8%. Net income available to common stockholders was $26.2 billion, down from $35.0 billion a year earlier, a decline the company tied to swings in its investment portfolio.

Here's how the company did:

• Revenue: $127.6 billion vs. $102.3 billion a year earlier
• Diluted earnings per share: $2.12 vs. $2.87 a year earlier
• Operating income: $40.6 billion vs. $31.2 billion a year earlier
• Net income available to common stockholders: $26.2 billion vs. $35.0 billion a year earlier

The company said it reported these results in a press release furnished to the Securities and Exchange Commission in a filing.

Segment results

Google Services revenue rose 11% to $96.3 billion. Google Search & other revenue rose 12% to $63.4 billion, and the company said year-over-year Search query growth was the highest in the last five years.

Google Cloud revenue reached $30.7 billion, up from $15.2 billion a year earlier. Its operating income was $11.1 billion, compared with $3.6 billion a year earlier. The company said TPU system sales were a meaningful contributor to revenue growth.

Other Bets generated $372 million of revenue and an operating loss of $2.0 billion, against a loss of $1.4 billion a year earlier. Alphabet-level activities cost $7.7 billion, up from $4.5 billion. The company said those costs primarily reflect its shared AI research and development.

Sundar Pichai, CEO of Google and Alphabet, said:

“We had a strong quarter and are now on a half-trillion dollar revenue run rate. Our deep full stack approach is driving momentum across the business, with Alphabet revenues growing 25% year-over year.”

Pichai also said the Gemini app has reached one billion users.

Costs and other income

Other income and expense swung to a net expense of $8.2 billion, from net income of $12.8 billion a year earlier. The company said a loss of $8.7 billion on equity securities reduced diluted earnings per share by $0.55.

Research and development expense rose to $20.6 billion from $15.2 billion. Headcount stood at 204,757 employees, up from 190,167 a year earlier.

Cash flow and capital returns

Net cash provided by operating activities was $42.3 billion in the quarter, compared with $48.4 billion a year earlier. Purchases of property and equipment were $51.4 billion, against $24.0 billion. Free cash flow was negative $9.1 billion in the quarter, and trailing twelve-month free cash flow was $19.7 billion.

The company issued senior unsecured notes for net proceeds of $28.7 billion, to be used for general corporate purposes. It also sold 12 million Class A shares for net proceeds of $4.3 billion and 24 million Class C shares for net proceeds of $8.1 billion under its at-the-market program. It said $27.6 billion remained available under that program.

In October, the board declared a quarterly cash dividend of $15.63 per share on each of its Series A and Series B mandatory convertible preferred stock. The preferred dividend is payable Nov. 15 to holders of record as of Nov. 1. The board also declared a quarterly cash dividend of 22 cents per share on Class A, Class B and Class C stock, payable Dec. 14 to holders of record as of Dec. 7.

The company's release did not include new financial guidance.