Google parent Alphabet on Tuesday reported a quarterly profit of $19.7 billion, powered by money taken in from ads, YouTube, and cloud services.
Alphabet beat market expectations, bringing in $76.7 billion in revenue, versus $69 billion in the same period a year earlier.
"I'm pleased with our financial results and our product momentum this quarter," Alphabet chief executive Sundar Pichai said in an earnings release.
Pichai added that Alphabet is continuing to focus on making artificial intelligence "more helpful for everyone," promising "exciting progress" on that front.
Consumers and investors have been keenly watching how companies take advantage of artificial intelligence, and Google along with Microsoft and OpenAI are considered leaders in the technology.
But Alphabet has largely been seen as playing catch up with Microsoft, with questions over whether the mighty Google search engine will withstand developments in AI.
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Microsoft was quick to beef up its Bing search engine with AI powers, but Google's search has yet to see a real threat to its dominance, and continues to hold about 90 percent of the market worldwide.
Google, like most big tech companies, saw its share price rise steeply in 2023 as investors expected AI to generate new revenue and open new markets.
Alphabet share prices slipped more than 5 percent to $131.40 in after-market trades Tuesday despite earnings figures that beat market expectations.
"It is a testament to the nature of Google's market dominance in search and ads that it can beat (earnings) estimates and have its stock sag immediately afterwards," said Insider Intelligence analyst Max Willens.
"Cloud computing is a much lumpier business than advertising, and one where Google is facing stiff competition."
While google may gain traction making money from AI in the long run, its Cloud unit for now is not enough to sate investors, Willens added.
Revenue in Alphabet's cloud division, which infuses AI into its services, was $8.4 billion in the quarter, compared to $6.7 billion in the same period a year earlier.
Microsoft riding cloud
Tech giant Microsoft said Tuesday its profits rose in the latest quarter, boosted by its strength in the closely watched cloud services segment.
The company exceeded expectations to report a net income of $22.3 billion for the July to September period, up 27 percent from a year ago.
All eyes have been on Microsoft's artificial intelligence and cloud computing performance, and a key aspect is the Azure cloud service, which competes with Amazon's AWS and Google Cloud.
In the latest quarter, revenue growth for Azure and other cloud services came in at 29 percent from a year ago, a slightly faster pace than the three months prior.
Overall, the company reported $56.5 billion in sales for the quarter, also higher than anticipated.
Microsoft shares surged by 4.6 percent in after-hours trading.
"We are rapidly infusing AI across every layer of the tech stack and for every role and business process to drive productivity gains for our customers," Microsoft chief executive Satya Nadella said in a statement.
The latest earnings report comes shortly after Microsoft closed its blockbuster acquisition of Activision Blizzard, whose video games include "Call of Duty," sealing one of the biggest technology tie-ups in history.
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