The Mag 7 Maverick: Alphabet Intends to Fly to the Top of Its AI Game with ‘Goose’ and Reports Blowout Cloud Revenue for Q3
The first of the Mag 7 earnings announcements came yesterday after the close with the release of Alphabet’s (GOOG) Q3 financial results. The company reported Q3 EPS of $2.12 vs FactSet $1.84 and quarterly revenue of $88.3B vs FactSet $86.4Bn. However, one of the most meaningful metrics to the Street was Google Cloud revenue which surpassed its revenue of 8.41Bn from a year ago by almost 35% coming in at $11.35Bn.
The company now will be looking to AI to build on its existing cost-cutting efforts in its continued attempt to streamline workflow and manage headcount. According to the company’s CEO Sundar Pichai, more than a quarter of new code created at Google is generated by AI. In February, the company launched a new internal AI model to assist employees with coding and building products called, “Goose”.
Following the report, Street sentiment was positive as 3Q beat was driven by advertising and cloud outperformance. Highlights from the report by analysts included improved Gen AI results, momentum and outlook, accelerating cloud growth, and strong margin expansion. Slowing Search and YouTube Ads were noted as concerns, but results were in-line with expectations.
This week more Mag 7 reports are in store as Meta (META) reports today after the close followed by Microsoft (MSFT) AMC Wednesday, and then Apple (APPL) and Amazon (AMZN) Thursday AMC. EPS expectations for the group are thought to be the slowest EPS growth in six quarters which has become increasingly subdued in recent months. AI will continue to be spotlighted as the key theme with a focus on Meta’s ad businesses, AI demand related to cloud providers, engineering productivity/cost savings growth, and Apple’s AI-enabled iPhone demand.
