SAN FRANCISCO, July 24 — Google-parent Alphabet yesterday reported profit and revenue that beat expectations as its AI-amped cloud and search ads businesses thrived.

The tech giant said its net income for the recently ended quarter was US$23.6 billion (RM110.3 billion) on revenue that climbed 14 per cent to US$84.7 billion when compared to the same period a year earlier.

“Our strong performance this quarter highlights ongoing strength in Search and momentum in Cloud,” said Google chief executive Sundar Pichai.

Alphabet reported that its cloud computing unit took in US$10.3 billion in revenue compared with US$8 billion in the same quarter last year, while search ad revenue climbed to US$48.5 billion from US$42.6 billion.

The ramped up revenue comes as investors worry that money being poured into artificial intelligence may not be generating significant returns for tech companies.

Since the release of ChatGPT at the end of 2022, players in the sector have been engaged in a frantic race to deploy generative AI programs for producing text, images and other content, simply through prompts in everyday language.

“We are innovating at every layer of the AI stack,” Pichai said.

“Our longstanding infrastructure leadership and in-house research teams position us well as technology evolves and as we pursue the many opportunities ahead.”

Only YouTube’s revenues came in slightly below analysts’ forecasts, at $8.66 billion.

“YouTube’s miss is disappointing given positive viewership trends and strategic decisions around live programming,” said Emarketer senior analyst Evelyn Mitchell-Wolf.

The earnings release came the same day as reports said Israel-based cloud security startup Wiz has walked away from a deal to be bought by Google for US$23 billion and remain a private company.

Alphabet shares that ended the formal trading day essentially flat slipped more than a percent to US$180.51 in after-market trades.

Investors have been keen to learn whether recently added AI-generated query result summaries referred to as “Overviews” cause a drop in online ad revenue at Google.

This new feature offers a written text at the top of results in a Google search, ahead of the traditional links to sites.

Many are concerned about the evolution of advertising across the internet if Google pushes on with the Overviews model, which reduces the necessity of clicking into links.

“With AI, we are delivering better responses on more types of search queries and introducing new ways to search,” Pichai said.

He added that Google is seeing increases in search use and satisfaction with AI-powered results.

On the earnings call, chief financial officer Ruth Porat said Alphabet is going to invest another US$5 billion in its Waymo autonomous car unit over the next few years.

A Waymo One robotaxi service last month became available to anyone in San Francisco interested in hailing a driverless ride.

Waymo One ride-hailing is available in San Francisco, Los Angeles, and Phoenix, with plans to “ramp up” in Austin next.

Cloud concerns

With their success, Google and the other cloud giants competing in the hot field of AI face scrutiny from regulators in the US and Europe.

Amazon — through its Amazon Web Services arm — Microsoft and Google are the world’s biggest providers of cloud-based data centres, which store and process data on a vast scale, in addition to being some of the world’s richest companies.

One major concern is that generative AI requires a massive amount of computing power, something that big tech companies are almost uniquely capable of delivering. — AFP