When generative AI exploded into public view in late 2022, plenty of pundits predicted it would be bad news for the likes of Google and Meta as nimble AI-powered rivals found new ways to capture netizens’ attention and monetize it.
Those pundits appear to have been wrong, as the two tech giants on Wednesday used quarterly earnings announcements to reveal their revenue has surged thanks to AI.
Sundar Pichai, CEO of Google’s parent company Alphabet, told investors that the web giant’s recently-released search update that presents results as prose written by AI instead of just a list of links “is already driving incremental total query growth” and “driving an expansionary moment for Search.”
It’s also driving more revenue. Alphabet’s advertising haul rose 12 percent year-over-year to hit $74.2 billion for Q3.
Google Cloud is also benefiting from AI. Pichai pointed to faster customer growth as orgs sign for Google’s AI smarts, bigger deals, and deeper engagements. Google Cloud revenue for Q3 was $15.15 billion, a 33 percent year-over-year jump.
Alphabet revenue for the quarter was $102.34 billion – the company’s first $100 billion quarter – representing 16 percent year-on-year growth.
Zuck’s bucks
AI also helped Meta to a strong quarter. CEO Mark Zuckerberg pointed [PDF] to AI-powered recommendations leading to users spending more time on the company’s social networks.
“Our ads business continues to perform very well, largely due to improvements in our AI ranking systems,” he added, before revealing “the annual run-rate going through our completely end-to-end AI-powered ad tools has passed $60 billion.”
Meta is also growing, fast, with Q3 revenue of $51.25 billion representing 26 percent year-over-year improvement.
Both companies plan to spend a lot more on AI infrastructure.
Meta previously forecast 2025 capital expenditure of $66 billion to $72 billion. It raised the floor to $70 billion, then predicted “notably larger” growth in spending during 2026.
Zuckerberg said much of that spending will go on infrastructure needed to develop “superintelligence” – Zuck-speak for a powerful personal assistant he hopes to develop and deploy.
The CEO told investors Meta needs to “aggressively frontload building capacity” for superintelligence, and that doing so won’t risk overinvestment in infrastructure that goes unused.
“We’ll use the extra compute to accelerate our core business, which continues to be able to profitably use much more compute than we’ve been able to throw at it,” he said. “And we’re seeing very high demand for additional compute, both internally and externally. And in the worst case, we were just slow building new infrastructure for some period while we grow into what we build. The upside is extremely high for both our existing apps and new products and businesses that are becoming possible to build.”
Our core business continues to be able to profitably use much more compute
Alphabet CFO Anat Ashkenazi said the company expects FY 2025 capital expenditure to be in the range of $91 billion to $93 billion, up from previous estimates of $85 billion. She said 60 percent of Q3’s $24 billion capex went on servers, with the remainder spent on data centers and networking equipment.
Investors liked what they heard from Alphabet, as its shares spiked six percent in after-hours trading. Meta shares sank seven percent, probably because its net income slipped 83 percent year-over-year due to coughing up a one-time income tax charge of $15.93 billion. ®
