Alphabet Has Strong Ad Sales but Cloud Business Disappoints

Alphabet Has Strong Ad Sales but Cloud Business Disappoints

Alphabet’s share price was down more than 6 percent in after-hours trading on Tuesday evening.

Google has focused on generative artificial intelligence, the technology that caused a splash when OpenAI released the A.I. chatbot ChatGPT last November. Google said in July that it would pour more resources into developing that technology while cutting other spending. In the last month, Google has shed hundreds of its recruiters and reorganized other parts of the company.

As of Sept. 30, the company had 182,381 employees, compared with about 119,000 at the end of 2019. Like other tech companies, Alphabet binged on hiring during the pandemic, and began to unwind those habits in January, when it cut 6 percent of its work force, or 12,000 employees.

Investors had expected that Alphabet would cut more costs in the third quarter. The company’s operating income, a measure of profitability, was a bit lower than the $21.6 billion that analysts had anticipated.

Google Cloud, the company’s division that offers software and technology services to other businesses, recorded sales that increased 22 percent to $8.4 billion. Analysts, though, had estimated $8.6 billion. Google has invested in making its cloud division a destination for artificial intelligence software, and the quarter’s performance disappointed investors who had hoped A.I. could be a launching pad for the unit. The division posted a profit of $266 million in the third quarter.

Sundar Pichai, Alphabet’s chief executive, said on a conference call on Tuesday that Google Cloud had momentum, and that he had seen signs that the unit’s performance would become more stable. Ruth Porat, the company’s president, chief investment officer and chief financial officer, told analysts on the call that the company’s cloud customers have been more careful with their spending.

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