Google's parent company Alphabet posted better-than-expected third-quarter results on Tuesday, with total revenues up 41%. While Google's ad business continues to subsidize its cloud expansion, Google Cloud brought in nearly $5 billion in Q3.
On a conference call, CFO Ruth Porat said "revenue performance in the third quarter reflects continued broad-based strength in advertiser spend and elevated consumer online activity as well as a strong contribution from Google Cloud."
Alphabet reported an overall net income of $18.94 billion and diluted earnings per share of $27.99. Total revenues came to $65.1 billion.
Analysts were expecting earnings of $23.47 per share on revenue of $63.45 billion.
"Five years ago, I laid out our vision to become an AI-first company," Alphabet and Google CEO Sundar Pichai said in a statement. "This quarter's results show how our investments there are enabling us to build more helpful products for people and our partners. Ongoing improvements to Search, and the new Pixel 6, are great examples. And as the digital transformation and shift to hybrid work continue, our Cloud services are helping organizations collaborate and stay secure."
As usual, Google Services revenues attributed most of the Q3 sales, with $59.88 billion in revenue, and advertising continues to generate the most revenue for Google. In Q3, Google ad revenues came to $53.13 billion, compared to $37.01 billion in Q3 2020.
In the third quarter, retail was again by far the largest contributor to year-over-year growth of the ads business, CBO Philipp Schindler said Tuesday. Media and entertainment, finance and travel were also strong contributors.
Google Search and other ad revenue (except for Youtube ad sales) grew to $37.93 billion in Q3. Revenue for YouTube ads rose from $5.04 billion in Q3 2020 to $7.21 billion in Q3 2021.
CFO Ruth Porat said that Apple's iOS 14.5 update, released in April, had a "modest impact" on YouTube revenues. The update has had ramifications for a number of companies that depend on digital ad sales, including Facebook and Snap. At issue is Apple's new App Tracking Transparency (ATT), which requires app developers to get permission from a user in order to track their activity across other apps and websites when using an iPhone or iPad.
"We see ATT as one aspect of the many broader ecosystem changes that are underway," Schindler said on Tuesday's call. "And we've been investing in privacy-preserving technology for many years. Our focus is on supporting developers, small and large advertisers, creators, publishers, so that they're able to mitigate impact to their businesses. And we really see the future of digital advertising built on advances and privacy-preserving, on-device technologies, which support the free and open Internet, and obviously, a robust ad ecosystem."
Google Cloud brought in $4.99 billion in sales for the third quarter of 2021. That's up 45% from $3.44 billion the year prior. The cloud business posted an operating loss of $644 million, compared with a loss of $1.2 billion a year prior.
In Alphabet's moonshot "Other bets" category, revenue came to $182 million while its operating loss reached $1.288 billion.