Google-parent Alphabet says its big bet on AI is paying off

STORY: Google-parent Alphabet says its investments in AI are paying off. On Tuesday, the tech giant beat profit forecasts for the third quarter, and said sales at its cloud unit jumped by more than a third. The news drove Alphabet shares nearly 6% higher in after-hours trade. Google had been seen to lag rival Microsoft on AI. But it’s spending big to catch up. Capital expenditures rose by almost two-thirds over the quarter, hitting $13 billion. Among other things, the money has been spent to beef up its Gemini chatbot. Analysts say there are signs of progress, with the firm’s AI tools getting better at providing answers. Earlier in the year, Google’s chatbot drew criticism for inaccurate responses, including a pizza recipe that listed glue as an ingredient. Now Alphabet will hope that AI can make up for slower growth in its mainstay search business. That unit grew by 12% over the period. Google also faces growing competition in the online advertising sector, which it had long dominated. Rivals like Amazon and TikTok have been gaining market share. Researchers at eMarketer predict Google’s share of U.S. search advertising revenue will fall below 50% next year for the first time in at least 18 years.

STORY: Google-parent Alphabet says its investments in AI are paying off. On Tuesday, the tech giant beat profit forecasts for the third quarter, and said sales at its cloud unit jumped by more than a third. The news drove Alphabet shares nearly 6% higher in after-hours trade.

Google had been seen to lag rival Microsoft on AI. But it’s spending big to catch up. Capital expenditures rose by almost two-thirds over the quarter, hitting $13 billion.

Among other things, the money has been spent to beef up its Gemini chatbot. Analysts say there are signs of progress, with the firm’s AI tools getting better at providing answers. Earlier in the year, Google’s chatbot drew criticism for inaccurate responses, including a pizza recipe that listed glue as an ingredient.

Now Alphabet will hope that AI can make up for slower growth in its mainstay search business. That unit grew by 12% over the period. Google also faces growing competition in the online advertising sector, which it had long dominated.

Rivals like Amazon and TikTok have been gaining market share. Researchers at eMarketer predict Google’s share of U.S.

search advertising revenue will fall below 50% next year for the first time in at least 18 years..