Artificial intelligence is boosting Google’s revenue and changing the way engineers work

Alphabet (GOOGL)parent company Google (GOOGLE)surprised Wall Street yesterday (October 29) with better-than-expected financial results for the July-September quarter. The technology conglomerate’s revenue increased 15 percent year-over-year to $88.3 billion, while net income jumped 34 percent to $26.3 billion. Alphabet shares jumped more than 5 percent this morning.

More than half of Alphabet’s revenue came from Google Search, which brought in $49.3 billion in the quarter, up from $44 billion in the same period in 2023. Earlier this year, the company began experimenting with generative artificial intelligence in its search engine by introducing artificial intelligence. -generated search summaries. The feature, known as AI Reviews, rolled out to more than 100 new countries this week and is expected to reach more than 1 billion users each month, the CEO said. Sundar Pichai. “We’re seeing strong engagement that is increasing overall search usage and user satisfaction,” Pichai said on the call, adding that people are “asking longer, more complex questions.”

AI is also changing the way Google engineers work. According to Pichai, more than a quarter of new code at Google is now generated using artificial intelligence. He noted that the code is subsequently reviewed and accepted by employees. “This helps our engineers do more and work faster,” the CEO said.

Revenue from Google Cloud jumped 35 percent in the quarter to $11.4 billion.

Alphabet’s Other Bets division, which includes the self-driving car company. Weimo and drone delivery service Wing generated $388 million in revenue, up from $297 million last year.

Waymo, which earlier this month raised $5.6 billion to fund its U.S. expansion, drives more than 1 million fully autonomous miles and takes more than 150,000 paid trips each week, Pichai said. Waymo currently operates in parts of San Francisco, Phoenix, Los Angeles and Austin.

YouTube generated $8.9 billion in advertising revenue during the quarter, up 12 percent from last year. The video platform uses Google’s Gemini artificial intelligence model to improve recommendations and user experience. These models “have a deeper understanding of video content and viewer preferences” and “can recommend more relevant, fresh and personalized content to the viewer,” the company said. Philipp Schindler, Google Chief Commercial Officer during an earnings call.

Alphabet doubles investment in artificial intelligence

Like other big tech players, Alphabet is spending money furiously to keep up with its artificial intelligence ambitions. The company’s capital expenditures rose 62 percent year over year to $13 billion, with Alphabet forecasting a similar figure for the next quarter. Much of that investment went into data centers, chips and other networking equipment.

In the most recent quarter, Alphabet announced $7 billion in planned data center investments, of which $6 billion will be in the United States. To meet the company’s electricity needs, the company also recently unveiled plans to receive nuclear energy from several reactors The eventual capacity is expected to be up to 500 megawatts, which Pichai called part of Alphabet’s “bold investment in clean energy.”

Despite its strong financial performance, Alphabet continues to face many challenges. Chief among them are ongoing antitrust claims from the US Department of Justice (DOJ) regarding Google’s alleged monopoly in online advertising. “We plan to vigorously defend these cases,” Pichai told analysts, adding that “some of the early proposals from the Department of Justice, etc., have had far-reaching implications—I think they could have unintended consequences, especially for the dynamic tech sector and American leadership is there.”