Alphabet (GOOGL) Stock: Earnings Beat Drives 6% Surge as Cloud AI Revenue Explodes

TLDR

• Alphabet posted Q3 EPS of $2.87, crushing the $2.26 estimate, while revenue hit $102.3 billion versus $99.9 billion expected.
• Google Cloud revenue surged 34% to $15.2 billion, with AI generating billions and the company signing more billion-dollar deals than the past two years combined.
• The tech giant raised 2025 capex guidance to $92 billion from $85 billion for AI infrastructure.
• Operating margin reached 33.9% excluding a $3.5 billion EU fine, while cloud operating margins improved to 24% from 17%.
• Shares jumped 6% in after-hours trading on the results.

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Alphabet shares rocketed 6% higher in after-hours trading Wednesday after the company delivered Q3 results that blew past Wall Street’s expectations. The earnings beat shows Google’s cloud business is finally gaining serious traction.

Alphabet Inc., GOOGL

The company reported earnings per share of $2.87, demolishing analyst estimates of $2.26. Revenue came in at $102.3 billion, well above the $99.9 billion consensus.

That’s a 16% jump from last year’s third quarter. But the real story is what’s happening inside those numbers.

Google Cloud Steals the Show

Google Cloud revenue jumped 34% to $15.2 billion, beating forecasts of $14.8 billion. CEO Sundar Pichai dropped an interesting data point on the earnings call.

The company signed more deals worth over $1 billion through Q3 than it did in the previous two years combined. Let that sink in for a moment.

AI is the driving force behind this growth. Executives confirmed AI generated “billions of dollars” in revenue for Google Cloud during the quarter.

The contract backlog hit $155 billion. That’s future revenue already locked in.

Recent wins include OpenAI adding Google as a cloud provider in July. Meta reportedly inked a $10 billion deal with Google Cloud in late August.

Anthropic agreed to use up to 1 million of Google’s TPU chips after the quarter ended. Bank of America estimates that deal alone could generate $10 billion in annual revenue.

Operating profit margins for cloud improved to 24% from 17% last year. The unit is becoming a real money maker.

AI Spending Accelerates

Alphabet bumped its 2025 capital expenditure forecast to $92 billion from $85 billion. CFO Anat Ashkenazi said demand for AI infrastructure outstrips supply.

The company generated over $150 billion in operational cash flow over the last 12 months. But free cash flow in the first nine months of 2025 stayed flat despite operational cash flows growing 30%.

That’s because the capex spending is intense. Alphabet sold $12.5 billion in bonds in May to fund the expansion.

The company still has room to maneuver with $98 billion in cash and short-term investments. It entered the AI race with minimal debt.

Operating margin was 30.5% for the quarter, or 33.9% excluding a $3.5 billion European Commission fine. That compares to 32.3% last year.

Search Business Holds Strong

The legacy advertising business still brings in about 85% of revenue. Search revenue reached $56.6 billion, beating the $55 billion estimate.

YouTube and Android businesses showed strong momentum with double-digit growth. The third-party ad network continues declining as web traffic shifts.

Cloud backlog reached $155 billion while the segment signed record billion-dollar contracts during Q3.

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