5 Things Spelling Trouble for Alphabet CEO Sundar Pichai
Sundar Pichai, Alphabet’s chief executive, has hailed his conglomerate’s “extraordinary” momentum as the Google owner beat Wall Street profit and revenue expectations.
Alphabet’s profit jumped 34 per cent in the third quarter as the parent company of the search giant reported strong growth in its cloud business amid robust demand for computing and data services used to train and run generative artificial intelligence.
The Google owner reported a 33.6% increase in third-quarter net profit to US$26.3bn (£20.3bn), outpacing Wall Street estimates of US$22.9bn.
Revenue rose 15% to US$88.3bn (£68.1bn), ahead of analyst estimates of US$86.4 billion.
Alphabet revenue from Google services, including search and subscriptions, rose 13% to US$76.5 billion, while sales from cloud computing rose 35% to US$11.4 billion.
Meanwhile, ad sales at its YouTube subsidiary rose 12 per cent to US$8.9bn.
Pichai said: “The momentum across the company is extraordinary. Our commitment to innovation, as well as our long-term focus and investment in AI, are paying off with consumers and partners benefiting from our AI tools.”
Tjhe Alphabet CEO told analysts that AI developments in search were “transforming the user experience”, expanding what people can search for and how much time they spend on the platform. People were asking longer and more complex queries, he added.
5 problems that spell trouble for Alphabet
However, Alphabet is facing issues on several fronts, which could even see Google itself being broken by the US Department of Justice.
#1 - Attempted breakup
Google faces the risk of potentially being broken up by the US Department of Justice, which has accused the search engine of stifling competition after a judge declared it an illegal monopoly. Multi-billion-dollar agreements between Google and other tech giants were deemed anticompetitive. Department of Justice lawyers are putting together a case.
Asked about the antitrust litigation, Pichai said: “Some of the early proposals from the DoJ have been far reaching, and I think they could have unintended consequences with the dynamic tech sector and American leadership there. We plan to engage very vigorously there.”
#2 - Generative AI search rivals
Generative AI platforms such as ChatGPT, Perplexity and Claude are making inroads into Google’s search business, despite Google rolling out its “AI Overviews” at the top of search results, powered by its own Gemini AI.
#3 - Third place in enterprise cloud
Google’s cloud business remains a distant third to Microsoft’s Azure and market leader Amazon Web Services and competition is cut-throat.
Microsoft has accused Google of secretly funding lobby groups to undermine its position with regulators as it tries to poach customers and win market share.
Asked about the perception of being one step behind, Pichai compared Google to the human brain, and said the company was “forming new synapses” to facilitate innovation.
#4 - Non-exclusivity over Android apps
Earlier this month, Google was ordered to open up its Google Play store after is lost another antitrust case last year, this time to Epic Games, the video game developer behind Fortnite. Google must make Android apps available from competing sources and cannot forbid use of in-app payment methods, according to the judge’s order.
#5 - More antitrust woes
Meanwhile, Google is in court over another antitrust trial. This time the issue at stake is Google’s control of the ad tech that handles payment and placing of ads on its search results. The case alleges that Google controls both sides of the transaction. The case could have far-reaching implications for Google’s primary source of revenue.
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