Alphabet beats Q3 estimates, continues to ramp up CapEx

Alphabet (GOOG, GOOGL) reported third quarter earnings results on Wednesday after the closing bell, beating several of Wall Street's estimates: earnings per share (EPS) came in at $2.87 (compared to estimates of $2.26), revenue came in at $102.35 billion (compared to estimates of $99.85 billion), revenue excluding traffic acquisition cost (ex-TAC) came in at $87.47 billion (compared to estimates of $85.11 billion), cloud revenue came in at $15.16 billion (compared to estimates of $14.75 billion), and capital expenditures (CapEx) came in at $23.95 billion (compared to estimates of $22.38 billion).

Yahoo Finance Senior Reporter Allie Canal examines the earnings release with Yahoo Finance anchor Josh Lipton.

To watch more expert insights and analysis on the latest market action, check out more Market Domination Overtime.

Video Transcript

00:00 Allie

We are just getting Alphabet earnings right now and it looks like another strong quarter here. We have Q3 revenue coming in above estimates. 102.35 billion. The estimate was just shy of 100 billion. Cap X spend also continues to ramp up nearly 24 billion. The estimate was just over 22 billion. Uh operating income did miss expectations. Uh YouTube ad revenue coming in slightly better than expected and overall Google ad revenue also coming in uh significantly better than expected. 71, uh 74.18 billion versus the expected 72.46 billion. Now on an EPS earnings basis, beating expectations there. $2.87. The expectation was for $2.26. Now, if that was the case, it would have been the slowest profit growth in over two years for uh uh uh Alphabet, uh partly reflecting that EU anti-trust fine. But when it comes to this company, you are just seeing time and time again them outperform when you look at earnings. You're seeing that reaction in shares up about 4% in after hours trading. and it's an interesting company when we talk about AI. It's both a tailwind and it's also a threat here because Google's search business with Open AI, that just emphasizes some of those competitive pressures. But then at the same time, we do see that it's Gemini AI models, Google Cloud's AI infrastructure deals with meta, Anthropic and even Open AI have boosted optimism across the board. And when you look at the street targets, a lot of animist, analysts out there are super bullish on this name having price targets up as much as 300 bucks a share. and we're inching closer to that number now Josh, nearing uh 280 or 290 uh bucks a share as, you know, we continue to see the stock climb in after hours.

01:43 Josh

Yeah, what's impressive is, this this stock had rallied into this print. I mean this was already up about 40% this year heading into the report. You're tacking on almost 6% in the after hours. Yes, it's about advertising and services, that's it really drives the top line, but a lot of focus as you rightfully pointed out, Allie, on that on that cloud business and that did look like a beat. The revenue 15.16, the street was at 14.75. We have seen a number of of AI deals involving Google Cloud, so in some sense you had a clue this was coming. Also like it's big cloud rivals of course, Google is is is investing a lot in AI data centers. So I was looking at that uh CAPEX number. It looks like they're seeing full year 91 to 93 billion and they had seen about 85 billion.

02:30 Allie

Yeah, that's that's that's a significant rise there. And and I mentioned the competitive pressures with search. Search continuing to uh be resilient here. a beat. 56.57 billion. The estimate was for just under 55 billion. So, search doing well, cloud doing well, increasing that cap X spend, beat on both the top and bottom lines. Shares are up 6%.

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