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Google’s moneymaking machine still pumping out massive profits
SAN FRANCISCO | Google is still thriving while the company navigates through a pivotal shift to artificial intelligence and battles regulators trying to topple its internet empire.
The latest evidence of Google’s prosperity emerged Tuesday with the release of its corporate parent Alphabet Inc.’s results for the July-September period. Both Alphabet’s profit and revenue increased at a brisker pace than industry analysts anticipated, thanks primarily to a moneymaking machine powered by Google’s ubiquitous search engine.
Alphabet earned $26.3 billion, or $2.12 per share during the most recent quarter, a 34% increase from a year ago. Revenue rose 15% from the same time last year to $88.27 billion.
The profits would have been even higher if Google wasn’t pouring so much money into building up its AI arsenal in a technological arms race that includes other industry heavyweights Microsoft, Amazon, Apple, Facebook parent Meta Platforms and rising star OpenAI. The AI investments are the primary reason Google’s capital expenditures in the past quarter soared 62% from the same time last year to $13.1 billion.
“Our commitment to innovation as well as the long-term focus and investment in AI are paying off,” Alphabet CEO Sundar Pichai said during a call discussing the results.
Investors as seemed pleased with the performance as Alphabet’s stock price climbed 4% in extended trading after the numbers came out.
Investing.com analyst Thomas Monteiro said Alphabet’s showing makes it likely more good news will be coming for Big Tech as this week progresses, with quarterly reports from Microsoft, Meta, Amazon and Apple still to come in the days ahead.
But a 4-year-old antitrust case brought by the U.S. Department of Justice has cast a cloud of uncertainty over Google’s future.
After weighing the evidence presented during a high-profile trial last year, a federal judge declared Google’s search engine is an illegal monopoly — a decision that has opened the door for a major shake-up. Earlier this month, the Justice Department suggested it might seek to break up Google as part of penalties that will be determined by U.S. District Judge Amit Mehta next summer.
Besides the legal assault on its search engine, Google also has been ordered to tear down the barriers protecting its Play Store for Android smartphone apps. That ruling came earlier this month after a jury decided that operation also was an illegal monopoly. Google is also nearing the end of another antitrust trial in Virginia revolving around the technology underlying its digital ad network.
As if the regulatory headaches aren’t enough, Google is also in the midst of a major makeover of its search engine that is putting an increasing emphasis on highlight results produced by artificial intelligence in response to competitive threats to alternative options relying on the same potentially revolutionary technology.
For now, at least, Google remains a juggernaut.
The digital ads tied to Google’s search engine remained the financial cornerstone. Revenue from that segment climbed 12% from a year ago to $49.39 billion. And Google’s cloud division is growing at an even more robust rate, thanks to demand for AI services. The cloud division generated $11.35 billion in revenue during the past quarter, a 35% increase from last year.
But the regulatory questions dogging Google remain a worry among investors. Although Alphabet’s shares have surged by more than 20% so far this year, Tuesday’s closing price of $169.68 remains well below their high of nearly $192 reached in July before the search engine monopoly ruling came out.
American consumers feeling much more confident
WASHINGTON | American consumers are feeling quite a bit more confident this month as Election Day approaches, a business research group says.
The Conference Board said Tuesday that its consumer confidence index jumped to 108.7 in October from 99.2 in September. It was the biggest monthly gain since March of 2021. Analysts forecast a more modest reading of 99.3.
The consumer confidence index measures both Americans’ assessment of current economic conditions and their outlook for the next six months.
The measure of Americans’ short-term expectations for income, business and the job market jumped to 89.1. The Conference Board says a reading under 80 can signal a potential recession in the near future.
The proportion of consumers anticipating a recession in the next 12 months fell to its lowest level since the board first posed the question as part of its survey in July of 2022.
The board reported Tuesday that consumers’ view of current conditions climbed 14.2 points to a reading of 138.
The number of respondents saying they planned to buy a home or car continued to rise.
“Consumers’ assessments of current business conditions turned positive,” said Dana Peterson, the Conference Board’s chief economist. “Views on the current availability of jobs rebounded after several months of weakness, potentially reflecting better labor market data.”
While there has been some recent data showing a weakening labor market, it broadly remains healthy by historical standards.
The government reported earlier this month that the U.S. economy added 254,000 jobs in September, much more than was forecast. The unemployment rate dipped to 4.1%. The October jobs report comes out Friday.
Also Tuesday, the Labor Department reported that U.S. job openings tumbled last month to their lowest level since January 2021, possibly signaling that the labor market is losing some momentum. Still, openings remain well above pre-pandemic levels.
Tepid jobs numbers from July and August had been dragging on Americans’ confidence and along with receding inflation, played a significant role in the Federal Reserve’s decision to cut its benchmark borrowing rate by 50 basis points, double the usual amount.
The rate cut, the Fed’s first in more than four years, reflected its new focus on bolstering a softening job market.
Fed policymakers also signaled that they expect to cut their key rate by an additional half-point in their final two meetings this year, and they envision four more rate cuts in 2025 and two in 2026.
Consumer spending accounts for nearly 70% of U.S. economic activity and is closely watched by economists for signs how the American consumer is feeling.
U.S. job openings fell in September even lower
WASHINGTON | U.S. job openings tumbled last month to their lowest level since January 2021, a sign that the labor market is losing some momentum. Still, posted vacancies remain well above pre-pandemic levels.
The Labor Department reported Tuesday that the number of job openings dropped to 7.4 million in September from 7.9 million in August. Economists had expected the level of openings to be virtually unchanged. Job openings fell in particular at healthcare companies and at government agencies at the federal, state and local levels.
The number of layoffs also rose. And the number of Americans who quit their jobs fell below 3.1 million, the fewest since August 2020.
“Workers (are) not as confident as they have been about being able to find a job if they quit without another to step into,” Carl Weinberg and Rubeela Farooqi of High Frequency Economics wrote in a commentary. Still, they added, “there is no signal here of any sudden collapse of the labor market here or any imminent recession. The labor market is softer, sure, but it is not imploding.”
Though job openings have fallen sharply since peaking at 12.2 million in 2022, they remain higher than they were before the coronavirus pandemic paralyzed the American economy in early 2020. When the economy roared back with unexpected strength from the COVID-19 recession, companies scrambled to find enough workers to keep up with customer orders.
The overheating economy caused an outburst of inflation, and the Federal Reserve responded by raising its benchmark interest rate 11 times in 2022 and 2023. Inflation has plummeted from a peak of 9.1% in June 2022 to 2.4%.
The economy proved surprisingly resilient in the face of the Fed hikes, dodging a widely forecast recession. Compared with a surge in hiring from 2021 through 2023, though, job creation has slowed this year — to an average of 200,000 new jobs a month from January through September this year. That is healthy though down from a record average of 604,000 jobs a month in 2021 at the end of pandemic lockdowns, 377,000 in 2022 and 251,000 last year.
Still, employers did add an unexpectedly strong 254,000 jobs in September. On Friday, the Labor Department is expected to report that the economy added 120,000 jobs in October, a total that will likely be held down by the effects of Hurricanes Helene and Milton and a strike at Boeing. The unemployment rate is expected to remain at a low 4.1%, according to a survey of forecasters by the data firm FactSet.
—From AP reports
