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Google Q3 - People still use search

On Wednesday night, Google released market-beating numbers. Revenue climbed 14% to $96 billion and earnings per share rose 22% to $2.18 for the quarter. The market has been worried that AI would start to eat into the company's search revenues. But that hasn't been the case, search now generates $54 billion a quarter, 12% higher than last year. The habit of Googling something is well entrenched, helped by the new AI-overview feature that appears at the top of most search results.
 
The cloud division posted impressive revenue growth of 32% to $13.6 billion. Due to strong demand for Google's data centres and AI computing power, the company now plans to spend $85 billion over the next year, expanding capacity, up from their February estimate of $75 billion. The expectation is that capital expenditure will continue to gain momentum going in 2026. They will probably end up spending over $100 billion a year on new data centres, which is remarkable.
 
These large tech companies are taking the profits from their maturing, highly cash-generative businesses and investing in the future. In the case of Google, they had free cash flow of $67 billion over the last 12 months. They plan to spend all of that, plus a few billion more, on investing in AI infrastructure.
 
Google was one of the pioneers of the AI industry over a decade ago. They lost that lead to OpenAI, but have bounced back strongly with Gemini. Google's big advantage is that they already have an ecosystem of hundreds of millions of users, who are prime candidates to add Gemini as an integrated extra to their current packages.
 
Google is ridiculously cheap if AI does turn out to be a world-changing technology, controlled by a few companies.


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