Google’s Strong Q3 Performance
Alphabet, Google’s parent company, announced its third-quarter earnings, revealing profits and revenue that surpassed expectations. Both internet search advertising and cloud computing showed growth that was significantly better than anticipated, leading to a surge in Google’s stock to a record high on Thursday morning.
Wall Street reacted positively, with multiple firms raising their price targets for Google stock following the announcement.
Upon the market’s opening, Google stock reached an all-time peak of 291.59, though it later adjusted those gains, settling around 283—a 3% increase. Interestingly, in the lead-up to this earnings report, the stock had gained over 43% in 2025 after a shaky start.
For the quarter ending September 30, which was revealed post-market on Wednesday, Google’s profits jumped 35%, hitting $2.87 per share. They report revenue following generally accepted accounting principles (GAAP).
Revenue Highlights
Google’s total revenue for Q3 climbed 16% to $102.35 billion, significantly above the analyst projections from FactSet, which estimated earnings per share (EPS) of $2.26 and revenue of $99.94 billion.
In particular, Google’s internet search ad revenue rose by over 14% to $56.57 billion, surpassing forecasts of $55.05 billion.
The cloud segment also saw impressive growth, with revenue increasing by 33.5% to $15.16 billion—again beating the expected figure of $14.7 billion. Furthermore, the backlog for Google Cloud grew by 82% year over year to $155 billion.
UBS analyst Stephen Zhu noted, “Today’s big takeaway was about cloud. With a $155 billion public backlog, Google is poised to expand much more than many investors expected.”
Meanwhile, YouTube’s ad revenue rose 15% to $10.26 billion, against an anticipated $10 billion. Evercore ISI analyst Mark Mahaney remarked, “Every major revenue source—advertising, search, YouTube, and cloud—showed accelerated growth, which is quite remarkable.”
In response to these results, Google raised its 2025 capital spending forecast to $92 billion, an 8% increase from previous estimates of $85 billion and $75 billion, primarily aimed at artificial intelligence cloud infrastructure.
Deutsche Bank’s Benjamin Black commented that although the capital expenditure guidance has risen, it is mainly to satisfy cloud infrastructure demands and AI investments, which may be viewed favorably by investors.
Challenges Ahead
Despite the strong performance, concerns remain about potential disruptions to Google’s search business from emerging competitors, including generative AI platforms like OpenAI. OpenAI recently introduced an AI-driven web browser expected to monetize through advertising.
Google started implementing AI-generated summaries in the U.S. market in mid-2024, presenting conversational summaries at the top of many search results. There’s ongoing debate about how this new format will impact Google’s search ad revenue in the long run.
On a positive note, TD Cowen analyst John Blackledge expressed confidence in Google’s core business, stating that AI features have driven accelerated query growth, particularly among younger users. He noted that queries using AI features doubled from the previous quarter, with daily U.S. users exceeding 75 million. Additionally, the user base for Google’s Gemini app expanded from 450 million in July to 650 million by the third quarter, showing substantial growth.
Overall, Google remains a key player in the AI sector.
In September, a federal judge determined that divesting Google’s assets wasn’t necessary as part of the remedies in an antitrust case pertaining to its search business.
Technical Insights
Google stock has a cumulative/distribution rating of B-plus. The Institutional Ownership Rating reflects fluctuations in stock price and volume over recent trading periods. A rating of A+ indicates significant purchases by institutional investors, while an E indicates major selling activity. A C grade is considered neutral.
Remarkably, Alphabet holds the highest IBD Composite Rating of 98 out of 99, suggesting a strong performance based on key indicators. This composite score helps investors evaluate the strength of a stock, with top growth stocks generally rating 90 or higher.
