Google Cloud revenue jumps 103% in Q3 as Gemini App hits 1 billion monthly users

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Google Cloud revenue jumps 103% in Q3 as Gemini App hits 1 billion monthly users

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Google Cloud revenue rose 103% year over year in Q3, and the Gemini App reached 1 billion monthly active users. Search still brings in more revenue, but cloud added more new dollars over the last 12 months. Alphabet shares are down 28% from their peak amid concerns about AI's effect on Search.

Alphabet's cloud business is now setting the pace for the company. Google Cloud revenue grew 103% year over year to $30.7 billion in the third quarter, after an 82% jump in Q2. According to CEO Sundar Pichai, the performance was "powered by huge demand for our AI infrastructure and AI solutions."

The Gemini App reached 1 billion monthly active users, which makes it the fastest-growing product in Alphabet's history.

Cloud adds more new revenue than Search

Search is still the larger business, but its growth is slowing. Search revenue rose just 12% in the quarter, down from a 17% increase in Q2. Queries were up significantly, yet AI Mode monetizes less well because of lower advertising density, and management hopes more search volume and new ad placements will fix that.

In dollar terms, the gap is wide. Google Search added an incremental $6.8 billion in ad revenue over the last 12 months, while Google Cloud added $15.6 billion. Even so, the search segment's $63.4 billion in quarterly revenue keeps it the company's main top-line contributor.

Shares fall despite the cloud surge

The stock dropped after the Q3 results. The market was likely concerned about slowing Search growth, according to the source.

Alphabet is down 28% from its peak and trades at a forward price-to-earnings ratio of 19.3. Part of the decline in this growth stock is likely due to concerns about AI's long-term impact on Google Search.

Google Cloud has a $561 billion customer backlog, which points to strong demand. But the company's large capital spending plan has pushed quarterly free cash flow into negative territory, and what returns AI will ultimately bring is the central question for shareholders.

Source: The Motley Fool

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