Alphabet has crossed a major financial milestone, closing the third quarter of 2025 with $102.3 billion in revenue, a 16 percent rise from a year earlier. It marks the company’s first time above the $100 billion line in a single quarter. Profit reached $34.98 billion, with earnings per share at $2.87, supported by growth across Search, Cloud, and YouTube. The company’s AI investments, long viewed as a heavy expense, are now showing visible returns.
The latest results capture a business that has begun to move beyond its ad dependence. Alphabet’s expansion into subscription services, enterprise software, and AI-driven tools has built new layers of revenue that now complement its core search and video operations. Sundar Pichai described it as a period when “AI is driving real business results across the company,” and the numbers back that up.
YouTube Anchors Alphabet’s Ad Business
YouTube was again a strong performer, delivering $10.26 billion in advertising revenue, a 15 percent increase over last year and ahead of analyst expectations. Direct-response advertising led the quarter, with brand spending close behind. Shorts, YouTube’s short-form video format, now generates more ad income per viewing hour in the United States than traditional in-stream content.
The platform’s first global NFL broadcast in September, a Chiefs-Chargers game streamed from Brazil, drew more than 19 million viewers and set a new record for concurrent livestreams. YouTube has also held the top spot for streaming watch time in the U.S. for more than two years, according to Nielsen.
Subscription income continues to grow. YouTube Music, Premium, and TV are now part of a unified subscription group under long-time executive Christian Oestlien. Together, those services contributed to Alphabet’s total of more than 300 million paid subscriptions, alongside Google One. The structural changes suggest Alphabet is pushing harder to balance its advertising and subscription revenue mix.
AI Mode and Search Expansion
Google’s core Search division saw renewed momentum through its AI features. AI Mode, rolled out across 40 languages, reached 75 million daily active users in Q3, doubling from the previous quarter. AI Overviews, the other major AI-driven feature, continued to expand query volume rather than replacing it. “AI Mode is driving real query growth, not replacing searches but expanding them,” Pichai told investors, emphasizing that generative tools are increasing overall engagement with Search.
The rise of AI-enhanced queries also pushed growth in commercial searches, which climbed faster than in Q2. Search and other advertising revenue rose 15 percent to $56.6 billion. Philipp Schindler, Google’s chief business officer, noted that advertisers are seeing better performance from automation. As he put it, “Advertisers are seeing better conversions because AI surfaces more relevant options in the moment.”
One driver has been AI Max, a new automated ad system introduced this quarter. Early users, including travel platform Kayak, reported double-digit gains in conversion value during trials. The technology uses Google’s generative models to predict when and how ads will perform best within each search session.
Cloud and Enterprise Growth
Cloud services remain Alphabet’s fastest-growing division. Revenue rose 34 percent year on year to $15.16 billion, and operating income nearly doubled to $3.6 billion. The Cloud backlog jumped 82 percent from a year earlier to reach $155 billion, reflecting rising enterprise demand for generative AI.
Executives said the company has signed more billion-dollar Cloud deals this year than in the previous two years combined. Around 70 percent of its Cloud customers are now using AI products. Over 150 of those firms each process about a trillion tokens through Google’s generative models every month. Demand for customized large models and agentic AI systems has helped Cloud margins improve to 23.7 percent from 17 percent last year.
Ruth Porat, Alphabet’s chief financial officer, said the company’s capital spending aligns closely with this trend. “Our investments follow the demand curve we see in AI infrastructure, and that demand keeps rising,” she said. The current phase of expansion includes new data centers and custom hardware, such as Google’s seventh-generation Ironwood TPUs, alongside Nvidia’s latest GPU clusters.
Gemini and AI Ecosystem Growth
The Gemini app, now available across Android, iOS, and web, surpassed 650 million monthly active users in September, up from 350 million in March. That figure reflects only the standalone app, not its integration into other Google products. The company credited the Nano Banana image-editing model for bringing in more than 20 million new users during the quarter. Gemini 3, the next major update, is expected later this year.
AI is also being embedded across other flagship platforms. Chrome now runs as what Google calls “a browser powered by AI,” with Gemini integrated into productivity and writing tools. The upcoming Android XR system, developed in collaboration with Samsung, will bring generative models to headsets and wearable displays. Across all services, Alphabet’s AI systems process over a quadrillion tokens per month—more than twenty times last year’s total.
Spending and Outlook
Alphabet raised its full-year capital expenditure guidance to between $91 billion and $93 billion, up from $85 billion previously. The increase will fund expansion of its data centers and chip infrastructure, with an even larger investment wave planned for 2026. Depreciation expenses grew 41 percent in Q3 to $5.6 billion as new facilities came online.
The quarter also included a $3.5 billion charge from a European Commission fine, which reduced the reported operating margin to 30.5 percent, though it would have been 33.9 percent excluding the charge. Free cash flow reached $24.5 billion for the quarter and $73.6 billion over the past twelve months. Alphabet ended September with $98.5 billion in cash and marketable securities.
Looking ahead, Pichai said the company plans to keep scaling AI infrastructure while maintaining growth across its consumer and enterprise units. Alphabet’s current direction, he said, is about “meeting people in the moment”, building AI systems that work within products billions already use every day.
For a company that built its fortune on search ads, Alphabet’s transformation into an AI platform is now visible in every corner of its business. Search, YouTube, Cloud, and Gemini each play a part in that shift. The quarter’s numbers suggest that transformation is no longer theoretical... it is beginning to define how Alphabet makes money, grows, and competes.
Notes: This post was edited/created using GenAI tools.
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