Google parent company Alphabet (GOOG, GOOGL) reported its third quarter earnings after the bell on Tuesday, beating analysts’ expectations on revenue and earnings per share, but a poor showing by the company’s cloud business sent the stock down in pre-market trade.
Revenue, excluding traffic acquisition costs for the third quarter, was $64.1 billion versus expectations of $63 billion. That’s higher than the $57.3 billion the company brought in during the same quarter last year. Adjusted earnings per share were $1.55. Analysts were expecting $1.44 per share.
But Google’s cloud business fell short of Wall Street’s estimates, topping out at $8.41 billion in the quarter versus expectations of $8.6 billion.
Shares of Alphabet fell more than 6% following the report.
“I’m pleased with our financial results and our product momentum this quarter, with AIdriven innovations across Search, YouTube, Cloud, our Pixel devices and more,” Google CEO Sundar Pichai said in a statement. “We’re continuing to focus on making AI more helpful for everyone; there’s exciting progress and lots more to come.”
Despite the miss on cloud revenue, the company’s advertising business reported $59.7 billion in revenue, beating consensus estimates of $58.9 billion.
Google, and advertising industry rival Meta (META), are seen as bellwethers for the industry, so any negative performance could have a dramatic impact on shares of other digital ad firms.
Google has been pouring money into its generative AI efforts after being caught off guard by Microsoft, which began rolling the technology into its products in February after investing in AI company OpenAI. Since then, Google has debuted a host of generative AI products for both its consumer and enterprise businesses, as it seeks to regain its standing as Silicon Valley’s AI leader.
The AI efforts are also part of Google’s plan to slice away at rivals Amazon’s (AMZN) and Microsoft’s (MSFT) shares of the cloud computing market. Google is in third behind its Washington-based competitors.
Google’s earnings announcement comes as the company is battling two antitrust suits filed by the Department of Justice accusing the company of abusing its power and distorting competition in the online search and digital advertising markets.
The tech giant is also staring down an effort by the European Commission to break up the company’s ad business. Japan’s antitrust watchdog, meanwhile, is investigating whether Google asked smartphone makers to favor search products over competing services, according to Bloomberg.