Alphabet (GOOGL) Stock Climbs 6% as Q3 Earnings Beat Wall Street Estimates

TLDR

• Alphabet reported Q3 earnings per share of $2.87, beating Wall Street’s estimate of $2.26, with revenue reaching $102.3 billion versus expected $99.9 billion.
• Google Cloud revenue grew 34% to $15.2 billion, with AI generating billions in revenue and the segment signing more $1 billion deals through Q3 than the previous two years combined.
• The company raised its 2025 capital expenditure guidance to $92 billion from $85 billion, focused on AI infrastructure investments.
• Operating margin was 30.5% for the quarter, or 33.9% excluding a $3.5 billion European Commission fine.
• Alphabet stock jumped 6% in after-hours trading following the earnings announcement.

Alphabet stock climbed 6% in after-hours trading Wednesday after reporting third-quarter results that crushed Wall Street expectations. The Google parent company posted earnings per share of $2.87, well above the consensus estimate of $2.26.

Alphabet Inc., GOOGL

Revenue for the quarter hit $102.3 billion, topping analyst forecasts of $99.9 billion. That represented a 16% increase from the same period last year.

The numbers tell a story of strong execution across the board. But investors are particularly excited about one thing: Google Cloud’s explosive growth.

Cloud Business Powers Past Expectations

Google Cloud revenue jumped 34% to $15.2 billion, beating the $14.8 billion analysts expected. The segment’s backlog of future revenue from customer contracts reached $155 billion.

CEO Sundar Pichai said the company signed more deals worth over $1 billion through Q3 than it did in the previous two years combined. That’s the kind of momentum that gets Wall Street’s attention.

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

The company has landed some major contracts recently. OpenAI added Google to its cloud infrastructure providers in July.

Meta reportedly signed a $10 billion deal with Google Cloud in late August. Anthropic, another AI developer, agreed to use up to 1 million of Google’s custom AI chips called TPUs after the quarter ended.

Capital Spending Ramps Up

Alphabet raised its 2025 capital expenditure forecast to $92 billion from the previous $85 billion. CFO Anat Ashkenazi said the higher spending goes toward AI infrastructure and that customer demand exceeds supply.

The company’s operational cash flow topped $150 billion over the last 12 months. But the rapid pace of capital expenditures is straining even those impressive numbers.

Free cash flow in the first nine months of 2025 was flat compared to last year, despite operational cash flows growing 30%. To keep up, Alphabet sold $12.5 billion in bonds in May.

The company still has plenty of financial flexibility. It entered the AI race with little debt and holds $98 billion in cash and short-term investments.

Operating margin came in at 30.5% for the third quarter, below analyst estimates. That was down from 32.3% last year.

However, a $3.5 billion European Commission fine skewed that number. Excluding the fine, the operating margin would have been 33.9%.

Google Cloud’s operating profit margins improved to 24% from 17% last year. That’s a key metric for investors watching whether the heavy cloud investments will pay off.

The legacy advertising business still generates about 85% of Alphabet’s revenue. Search revenue reached $56.6 billion during the quarter, higher than the $55 billion forecast.

YouTube and other core ad properties continue delivering double-digit sales growth. Android-related businesses showed particularly strong momentum.

The third-party ad network remains a weak spot, with sales continuing to decline. This segment faces potential divestiture in the ongoing U.S. v. Google antitrust case.

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