A.I. Is Boosting Google Earnings and Changing How Engineers Work, Says CEO Pichai

Alphabet, the parent company of Google, surprised Wall Street yesterday (Oct. 29) with better-than-expected financial results for the July-September quarter. The tech conglomerate saw its revenue increase 15 percent year-over-year to $88.3 billion, while net income jumped 34 percent to $26.3 billion. Alphabet shares jumped more than 5 percent this morning.

More than half of Alphabet’s revenue came from Google Search, which brought in $49.3 billion for the quarter, up from $44 billion during the same period in 2023. The company earlier this year began experimenting with generative A.I. across its search engine with the introduction of A.I.-generated search summaries. Known as AI Overviews, this feature was rolled out in more than 100 new countries this week and is expected to reach more than 1 billion users on a monthly basis, according to CEO Sundar Pichai. “We are seeing strong engagement, which is increasing overall search usage and user satisfaction,” Pichai said during the earnings call, adding that people “are asking longer and more complex questions.”

A.I. is also changing how Google engineers work. More than a quarter of new code at Google is currently A.I.-generated, according to Pichai, who noted that the code is subsequently reviewed and accepted by employees. “This helps our engineers do more and move faster,” the CEO said.

Revenue from Google Cloud jumped 35 percent to $11.4 billion during the quarter.

Alphabet’s “Other Bets” division, which includes the self-driving company Waymo and the drone delivery service Wing, brought in $388 million in revenue, up from $297 million last year.

Waymo, which earlier this month raised $5.6 billion to fund its expansion across the U.S., drives more than 1 million fully autonomous miles and completes more than 150,000 paid trips on a weekly basis, according to Pichai. Waymo currently operates in parts of San Francisco, Phoenix, Los Angeles and Austin.

YouTube generated $8.9 billion in ad revenue during the quarter, representing a 12 percent increase year-over-year. The video platform is incorporating Google’s Gemini A.I. model to improve recommendation and user experience. These models “have a deeper understanding of video content and viewers preferences” and “can recommend more relevant, fresher and personalized content to the viewer,” said Philipp Schindler, Google’s chief business officer, during the earnings call.

Alphabet doubles down on A.I. investments

Like other Big Tech players, Alphabet is spending furiously to keep up with its A.I. ambitions. The company’s CapEx rose 62 percent year-over-year to $13 billion, with Alphabet predicting a similar figure for the next quarter. The majority of these investments went towards data centers, chips and other networking equipment.

During the latest quarter, Alphabet announced $7 billion in planned data center investments alone—$6 billion of which will take place in the U.S. To help meet the company’s demand for power, it also recently unveiled plans to acquire nuclear energy from multiple reactors expected to eventually enable up to 500 megawatts, which Pichai described as part of Alphabet’s “bold clean energy investments.”

Despite high-flying financial figures, Alphabet continues to face an array of challenges. Chief among them are ongoing antitrust claims from the U.S. Department of Justice (DOJ) over Google’s alleged monopoly in online advertising. “We plan to vigorously defend these cases,” Pichai told analysts, adding that “some of the early proposals from the DOJ, etc., have been far-reaching—I think they could have unintended consequences, particularly to the dynamic tech sector and the American leadership there.”