Skip to content
    GOOGL
    Earnings call· Sep 2025(Q3 FY25)

    Alphabet Inc. GOOGL

    Oct 29, 2025 Source

    Executive summary

    Alphabet Q3 FY25 — AI Drives Record Revenue and Cloud Backlog Growth

    Alphabet delivered a record-breaking quarter, surpassing $100 billion in revenue, propelled by double-digit growth across all major segments and significant AI-driven momentum. The company's full-stack AI approach is yielding tangible results, from Gemini's user adoption to Cloud's accelerating growth and substantial backlog expansion, positioning it strongly for future opportunities despite regulatory fines and tight supply in its Cloud infrastructure.

    Highlights

    5

    • Consolidated revenue reached $102.3 billion, up 16% year-over-year, marking the company's first ever $100 billion+ quarter.

    • Google Cloud revenue increased 34% to $15.2 billion, with operating income up 85% to $3.6 billion.

    • Cloud backlog grew 46% quarter-over-quarter to $155 billion, driven by strong demand for enterprise AI.

    • The Gemini app now has over 650 million monthly active users, with queries increasing 3x from Q2.

    • Alphabet crossed $300 million paid subscriptions, led by growth in Google One and YouTube Premium.

    Concerns

    4

    • A $3.5 billion charge related to a European Commission fine significantly impacted G&A expenses and Google Services operating margin.

    • Network advertising revenues were down 3% year-over-year to $7.4 billion.

    • Year-over-year advertising comparisons in Q4 will be negatively impacted by strong U.S. election spend in Q4 2024.

    • The Cloud demand-supply environment is expected to remain tight in Q4 2025 and throughout 2026.

    Guidance & targets

    5
    CategoryTargetConfidence
    CapEx for 2025
    $91 billion to $93 billion
    high materiality
    High
    CapEx for 2026
    significant increase
    high materiality
    Medium
    Depreciation growth rate
    accelerate slightly
    medium materiality
    High
    Sales and marketing expenses weighting
    more heavily weighted to the end of the year
    low materiality
    High
    Cloud demand-supply environment
    remain in a tight demand-supply environment
    high materiality
    High

    Segment performance

    7
    SegmentRevenueYoYQoQMargin
    Google Services
    Reflecting strength in Google Search, YouTube advertising, and subscriptions. Operating margin declined year-over-year due to the EC fine, which was fully reflected in this segment.
    		$87.1 billion14%—$33.5 billion operating income (38.5% margin)
    Google Search and other advertising
    Another robust quarter with continued growth across all major verticals, with the largest contributions from retail and financial services.
    		$56.6 billion15%——
    YouTube advertising
    Driven by direct response advertising, followed by brand.
    		$10.3 billion15%——
    Network advertising
    Experienced a decline year-over-year.
    		$7.4 billion-3%——
    Subscriptions, platforms and devices
    Driven by very strong growth in both YouTube and Google One subscriptions.
    		$12.9 billion21%——
    Google Cloud
    Delivered very strong results, benefiting from enterprise AI optimized stack. GCP's growth was driven by enterprise AI products, enterprise AI infrastructure, enterprise AI solutions, and core GCP. Double-digit growth in Workspace. Operating margin expansion driven by strong revenue and efficiencies, partially offset by higher technical infrastructure usage costs.
    		$15.2 billion34%—$3.6 billion operating income (23.7% margin)
    Other Bets
    Resources are being allocated to businesses like Waymo, where substantial value opportunities are seen.
    		$344 million——$1.4 billion operating loss

    Operational metrics

    27
    Consolidated Revenue
    $102.3 billionup 16% YoY (15% in constant currency)
    Q3 FY25

    First ever $100 billion+ quarter for Alphabet.

    Total Cost of Revenue
    $41.4 billionup 13%
    Q3 FY25
    Traffic Acquisition Costs (TAC)
    $14.9 billionup 8%
    Q3 FY25
    Other Cost of Revenues
    $26.5 billionup 16%
    Q3 FY25

    Increase primarily driven by content acquisition costs largely for YouTube, followed by depreciation and other technical infrastructure operations costs.

    Total Operating Expenses
    $29.7 billionincreased 28%
    Q3 FY25
    Operating Income
    $31.2 billionincreased 9%
    Q3 FY25
    Operating Margin
    30.5%
    Q3 FY25
    Operating Margin (ex-EC fine)
    33.9%
    Q3 FY25
    Other Income and Expenses
    $12.8 billion
    Q3 FY25

    Primarily due to unrealized gains in nonmarketable equity securities portfolio.

    Net Income
    $35 billionincreased 33%
    Q3 FY25
    Earnings Per Share (EPS)
    $2.87increased 35%
    Q3 FY25
    Cash and Marketable Securities
    $98.5 billion
    end of Q3 FY25
    CapEx
    $24 billion
    Q3 FY25

    Vast majority invested in technical infrastructure.

    Depreciation
    $5.6 billionincreased $1.6 billion YoY (41% growth)
    Q3 FY25
    Stock Repurchases
    $11.5 billion
    Q3 FY25
    Dividend Payments
    $2.5 billion
    Q3 FY25
    Gemini tokens processed (direct API)
    7 billion
    per minute

    Via direct API used by customers.

    Gemini tokens processed (all surfaces)
    1.3 quadrillionmore than 20x growth in a year
    monthly

    Across all Google surfaces.

    Existing Google Cloud customers using AI products
    70%
    Q3 FY25

    Includes customers like Banco BV, Best Buy, and FairPrice Group.

    GCP product lines at $1B+ annual run rate
    13
    Q3 FY25
    Google Cloud customers processing ~1 trillion tokens
    nearly 150
    past 12 months

    For a wide range of applications.

    NFL broadcast concurrent viewers (YouTube)
    more than 19 millionnew record
    Q3 FY25

    First exclusive global broadcast of an NFL game on YouTube.

    AI Max in Search
    billions
    Q3 FY25

    Fastest-growing AI-powered search ads product, used by hundreds of thousands of advertisers.

    Sales team productivity (Gemini)
    10%increased over 10%
    Q3 FY25

    Led to hundreds of millions in incremental revenue by streamlining customer interactions.

    Customer support sessions (Gemini-powered)
    40 million
    YTD

    Resolved hundreds of thousands of customer inquiries.

    CapEx technical infrastructure split
    60% servers / 40% data centers and networking equipment
    Q3 FY25

    Split of CapEx investment in technical infrastructure.

    YouTube Shorts revenue per watch hour
    more than traditional in-stream
    Q3 FY25

    Industry KPIs

    6
    MetricValueDetails
    Family dap dau650 millionusers
    CAPEX compute commitments$24 billionUSD
    Advertising revenue by segment$56.6 billionUSD
    Share buyback capital returned$11.5 billionUSD
    Ai feature adoption monetization650 million MAUusers
    Custom silicon ai infrastructure7-generation TPU Ironwood

    Product announcements

    11
    ProductTypeDetails
    A4X Max instanceslaunch
    7-generation TPU Ironwoodlaunch
    Gemini 3roadmap
    Pixel 10 serieslaunch
    Android XRlaunch
    AI Modeexpansion
    Gemini Enterpriselaunch
    Waymo service expansionexpansion
    Waymo autonomous operationsmilestone
    Waymo for Businesslaunch
    Waymo Teens accountslaunch

    Deals & partnerships

    6
    AnthropicAccess to TPUs

    Anthropic recently shared plans to access up to 1 million TPUs.

    NVIDIAGPU integration for Cloud customers

    Alphabet is scaling NVIDIA GPUs in its data centers and is now shipping A4X Max instances powered by NVIDIA GB300 to cloud customers.

    SamsungAndroid XR operating system for Galaxy XR device

    Alphabet launched Android XR, its new operating system, at Samsung's Galaxy XR device event.

    PayPalAgentic commerce experiences

    Partnership to help merchants build agentic commerce experiences.

    NFLExclusive global broadcast of NFL game

    Expanded partnership with NFL for YouTube's first-ever exclusive global broadcast of an NFL game, which drew over 19 million fans.

    Dude PerfectCollaboration for Xfinity ad campaign

    Collaboration with Dude Perfect helped Comcast's Xfinity drive significant search and recall lift for its ad campaign.

    Risks & headwinds

    6
    European Commission FineQ3 FY25

    $3.5 billion charge

    Network Advertising DeclineQ3 FY25

    down 3% YoY

    Q4 Advertising ComparablesQ4 FY25

    negative impact

    Cloud Demand-Supply ImbalanceQ4 FY25 and 2026

    tight demand-supply environment

    Mitigation: Working to increase capacity, improved pace of server deployments and data center construction.

    Increased Depreciation ExpenseQ4 FY25

    growth rate to accelerate slightly

    Sales & Marketing Expense WeightingQ4 FY25

    more heavily weighted to the end of the year

    What to watch in Q4 FY25

    5

    CapEx for 2026

    Q4 FY25 earnings call
    Currentsignificant increase expected
    TargetSpecific guidance for 2026 CapEx

    Why it matters

    CapEx is a major investment area, especially for AI infrastructure, impacting future growth and profitability.

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

    Q&A highlights

    6

    How will agentic e-commerce monetize compared to traditional Search, and what factors ensure a smooth transition? Also, how far is Waymo from integrating with core Gemini capabilities and user data for pre-scheduled rides?

    Philipp Schindler stated that agentic experiences are additive, helping users and businesses, and they are working on seamless user experiences and integrating partner ecosystems, especially in shopping with AI Mode and agentic checkout. Sundar Pichai confirmed that Waymo is scaling up in 2026 and sees a real opportunity to dramatically improve the in-car experience with Gemini's multimodal capabilities and other services, expecting new experiences in 2026.

    “we're working on multiple agentic experiences across key verticals such as travel, commerce, shopping and so on, and we're paying a lot of attention to creating a seamless user experience but also to the fact that we need to integrate different partner ecosystems in a way that it creates value for them. [...] I think the possibility, as you said, of Gemini, particularly with the multimodal experience as well as services like YouTube, I think there's a real opportunity to make the in-car experience dramatically better. Definitely something we are excited about, and you'll see newer experiences in 2026 for sure.”

    asked by Brian Nowak · answered by Philipp Schindler

    2 min read6 chapters

    Detailed Narrative

    01

    AI Infrastructure & Models

    Alphabet's full-stack AI approach leverages extensive infrastructure, including NVIDIA GPUs and proprietary 7-generation TPU Ironwood, to meet tremendous demand, exemplified by Anthropic's plan to access up to 1 million TPUs. The company's models like Gemini 2.5 Pro, Veo, and Genie 3 are world-leading, with Gemini 3 expected later this year, and quantum computing breakthroughs like the Willow chip demonstrating significant advancements.

    02

    AI-Driven Search Evolution

    AI is expanding Search engagement, with AI Overviews driving meaningful query growth, especially among younger users, and AI Mode resonating strongly with over 75 million daily active users globally. These AI experiences are enhancing commercial queries and monetization opportunities, with AI Max in Search already used by hundreds of thousands of advertisers and unlocking billions of net new queries.

    03

    Google Cloud Momentum

    Google Cloud achieved 34% revenue growth, driven by enterprise AI products and a 46% sequential increase in backlog to $155 billion. The segment signed more $1 billion+ deals in the first 9 months of 2025 than in the prior two years combined, with 13 product lines now exceeding $1 billion in annual run rate, demonstrating strong product differentiation and operating margin expansion.

    04

    YouTube's Dual Monetization Engine

    YouTube continues to lead in U.S. streaming watch time and saw 15% advertising revenue growth, driven by direct response and brand. Shorts now earn more revenue per watch hour than traditional in-stream, and the platform's subscription offerings, including YouTube Music and Premium, are experiencing strong growth, contributing to a robust "twin engine" monetization strategy.

    05

    Waymo Expansion & Innovation

    Waymo is expanding its service to new cities like London and Tokyo in 2026, and secured autonomous operating permissions at San Jose and San Francisco Airports. The launch of Waymo for Business and Waymo Teens accounts indicates growing market penetration and diverse use cases, with future integration with Gemini capabilities expected to enhance the in-car experience.

    06

    Financial Performance & Capital Allocation

    Alphabet reported consolidated revenue of $102.3 billion, up 16% YoY, with operating income of $31.2 billion (up 9%) and EPS of $2.87 (up 35%). The company generated $24.5 billion in free cash flow and ended the quarter with $98.5 billion in cash. CapEx for 2025 is now guided to $91-93 billion, with a significant increase expected in 2026, primarily for technical infrastructure to support AI demand.

    AI-generated summary of the company’s earnings call. Not investment advice.