Alphabet Shares Drop on Soft Cloud Performance

Google’s parent company Alphabet reported 11% revenue growth in the third quarter, as a return in advertising bumped expansion into double digits for the first time in more than a year. However, company shares dropped almost 7% in late trading as its cloud business missed analysts’ estimates.

The healthy boost in revenue comes after four quarters of single-digit expansion. Google’s core advertising softened due to economic weakening last year and greater competition from TikTok.

Cloud revenue came in below estimates at $8.41 billion, missing the mark by more than $20 million. Alphabet’s cloud unit has been an important area of focus as the tech giant tries to catch Amazon Web Services and Microsoft Azure.

This portion of its business is becoming even more important with the emergence of generative artificial intelligence because more companies are turning to the public cloud to run significant workloads.

Even though the unit underperformed, cloud still swelled 22% from a year earlier, twice the rate of growth for the company as a whole.

Much of Google’s year so far has been highlighted by cost cuts after years of rampant growth. In January, the company announced it was cutting 12,000 jobs, affecting roughly 6% of its full-time workforce. Last month, the company eliminated hundreds of positions from its recruiting organization.

Now, following the launch of OpenAI’s ChatGPT chatbot, Google has been racing to add generative AI technology to more products and is testing it within core search.