Alphabet’s latest quarterly earnings delivered the goods, beating Wall Street analysts’ expectations on both the top and bottom lines.

The consensus among analysts covering Alphabet stock was for revenue of about $100 billion. Strong advertising sales at Google and YouTube, and robust demand for artificial intelligence compute power at Google Cloud, resulted in revenue of $102.4 billion, up 16% year over year.

We delivered our first-ever $100 billion quarter.

Sundar Pichai, CEO of Alphabet and Google

Google services, including Search, Android, YouTube, and Chrome, saw revenue of $87.1 billion, up 14.5% year over year, thanks to ad demand and higher ad prices. Google Cloud sales jumped 34% to $15.2 billion, due to growing client training and use of AI apps, including agentic AI.

Alphabet Q3 2025 revenue by key business:

  • Google Search: $56.6 billion, up 14.5%
  • YouTube ads: $10.3 billion, up 15%
  • Subscriptions, including Google One and YouTube Premium: $12.9 billion, up 20.8%
  • Google Cloud: $15.2 billion, up 34%
    Source: Alphabet’s Q3 earnings release

Profit grew even faster than revenue. Alphabet’s operating margin was 30.5%, and its net income was nearly $35 billion, up 33%. Its earnings per share, or EPS, of $2.87 increased 35%, outpacing analysts’ $2.27 target.

As expected, most of its operating profit, some $33.5 billion, came from Google Services. However, what really stands out is the leverage in Google Cloud. Its operating income surged a whopping 85% year over year to $3.6 billion.

The top and bottom-line beats weren’t the only reasons Alphabet’s stock is surging, though.

3 reasons why Alphabet stock is trading higher

Investors are happy to hear that Alphabet outpaced expectations, but stock prices move based on forward expectations, and there was a lot to like in Alphabet’s report. It suggested that demand hasn’t peaked and that management, including CEO Sundar Pichai, is executing well.

Among the core drivers of Alphabet’s future, there are three that really stand out:

  • The Gemini App has over 650 million monthly active users.
  • Google Cloud ended the quarter with a backlog of $155 billion.
  • Capital Expenditures guidance increased.

Gemini reaches cruising altitude versus ChatGPT

When OpenAI’s ChatGPT became the fastest app to reach 1 million users after its launch in 2022, many worried that Google’s search dominance could be in jeopardy as more users turned to AI for answers.

Alphabet CEO Sundar Pichai rose a wave of AI demand to record third-quarter sales.

Porzycki/NurPhoto via Getty Images

Those concerns amplified after users met Google’s first large language model, Bard, with a collective yawn. Since the AI Chatbot’s rebirth as Gemini, however, concerns over Google’s search business have increasingly faded.

Investors still expect shocks to Google search revenue, but they’re increasingly convinced that Alphabet will be able to maintain a significant share because of Gemini’s adoption.

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Gemini is consistently one of the most downloaded apps on the Apple store, and given that it has grown to 650 million active users, it appears to have established itself as a strong alternative to ChatGPT, especially given its simple integration with Android and Chrome.

Google Cloud backlog surges to record highs

Alphabet is fighting tooth and nail against deep-pocketed hyperscaler rivals Amazon’s AWS and Microsoft’s Azure in the government and enterprise cloud network business. Oracle’s expansion into a major hyperscaler has also posed a threat.

Cloud backlog grew 46% quarter-over-quarter to $155 billion.

CEO Sundar Pichai

While that competition remains fierce, Alphabet reported that its Google Cloud backlog of business reached $155 billion last quarter — providing a clear line of sight for ongoing segment growth, key to continuing to provide leverage that can drive the segment’s operating income increasingly higher in the coming year.

Capital expenditures guidance ramps

One of the nagging risks facing hyperscalers, including Google Cloud, is that demand is outstripping supply, crimping revenue and profit growth.

Hyperscalers are investing hundreds of billions of dollars in high-end, liquid-cooled servers powered by Nvidia GPUs, designed for AI workloads to meet demand for AI training and inference. Some have worried that this spending will create overcapacity, potentially denting profitability.

Alphabet/Google capital expenditures by quarter (2025):

  • Q3 2025: $24 billion
  • Q2 2025: $22.4 billion.
  • Q1 2025: $17.2 billion.
  • Q4 2024: $14.3 billion
  • Q3 2024: $13 billion.
    Source: Alphabet Q3 earnings presentation

Alphabet spent $24 billion on capex in the third quarter to expand its business, 83% more than it spent one year ago, and the fastest year-over-year growth so far in 2025.

The company’s backlog gives investors more confidence that demand remains robust, and its decision to increase capital expenditures, much of which flows to AI infrastructure, to $91 to $93 billion shows they’re keeping their foot on the gas in building out the cloud business.

It had previously been modeling for capex of about $85 billion for the full year.

Looking out to 2026, we expect a significant increase in CapEx, and we’ll provide more detail on our fourth quarter earnings call.

Anat Ashkenazi, Alphabet CFO

Alongside its strong margins and bottom-line performance, investors are walking away increasingly convinced that Alphabet can have its cake and eat it, too, plowing big money into AI infrastructure to meet demand while still delivering investor-friendly earnings per share growth.

Further evidence? Cash, equivalents, and marketable securities on Alphabet’s balance sheet totaled $98.5 billion, up from $95.7 billion one year ago, despite the spending.

Altogether, it paints a picture for ongoing growth.

“GOOG still expects tight capacity for Google Cloud in December and throughout 2026,” wrote veteran technology fund manager Gene Munster on X (formerly Twitter). “That means whatever growth they report could have been higher if they had more capacity.”

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