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Alphabet's AI Spending Spree Hits Profit
29 Oct
Summary
- Alphabet's net profit fell 25% to $26.2bn, missing expectations.
- The tech giant invested heavily in AI chips and datacenters, raising capex significantly.
- Shares dropped over 10% after reporting slower advertising growth.
- Google Cloud revenue soared 103%, and its AI chips compete with Nvidia.
Alphabet's net profit experienced a 25% year-over-year decline, reaching $26.2bn in the July-to-September quarter, which fell below analyst forecasts. Revenue climbed to $127.6bn, a 25% increase, though slightly under predictions. The company's advertising revenue grew by 11% to $82bn, marking a slowdown. Notably, Google Cloud demonstrated substantial growth, with revenue surging 103% to $30.7bn, driven partly by sales of its Tensor Processing Unit (TPU) chips.
Despite revenue increases, the tech giant's shares dropped more than 10% in after-hours trading due to lower-than-expected profit and a deceleration in its core advertising business. Alphabet maintained substantial investments in artificial intelligence, with capital expenditures more than doubling to $51.4bn, primarily for datacenters and AI chips. This significant investment strategy aims for long-range planning, according to CEO Sundar Pichai. The company also reported that its AI models now process nearly 32 billion tokens per minute, a fourfold increase from the previous year.
