What Management Said
Read the full Q3 2025 transcript ↗A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release, which is distributed and available to the public through our Investor Relations website located at abc.xyz/investor. This was a terrific quarter for Alphabet, driven by double-digit growth across every major part of our business. Our revenue number has doubled since then, and we are firmly in the generative AI era. Cloud had another great quarter of accelerating growth with AI revenue as a key driver.
We crossed 300 million paid subscriptions led by growth in Google One and YouTube Premium. We are investing in TPU capacity to meet the tremendous demand we are seeing from customers and partners, and we are excited that Anthropic recently shared plans to access up to 1 million TPUs. We are now processing over 1.3 quadrillion monthly tokens, more than 20x growth in a year. This growth rate increased in Q3, largely driven by our AI investments in Search, most notably AI Overviews and AI Mode.
In the U.S., we have seen strong and consistent week-over-week growth in usage since launch, and queries doubled over the quarter. Over the last quarter, we rolled out AI Mode globally across 40 languages in record time. Most importantly, AI Mode is already driving incremental total query growth for Search. Our complete enterprise AI product portfolio is accelerating growth in revenue, operating margins, and backlog.
What went well
- First-ever $100 billion+ quarter: consolidated revenue reached $102.3 billion, up 16% (15% constant currency), with double-digit growth across Search, YouTube ads, subscriptions, and Cloud.
- Google Search and other revenue accelerated to 15% growth ($56.6 billion), driven by AI Overviews and AI Mode expanding queries including commercial queries.
- Google Cloud revenue grew 34% to $15.2 billion with operating income up 85% to $3.6 billion and margin expanding from 17.1% to 23.7%.
- Cloud backlog surged 46% sequentially and 82% YoY to $155 billion ($49 billion sequential increase); more $1B+ deals signed in the first nine months than in the prior two years combined.
- Revenue from products built on Google's generative AI models grew more than 200% YoY; 13 Cloud product lines each at $1B+ annual run rate.
- AI Mode reached over 75 million daily active users with queries doubling over the quarter; Gemini app surpassed 650 million MAU with queries up 3x from Q2.
- Subscriptions, platforms and devices revenue grew 21% to $12.9 billion; crossed 300 million paid subscriptions led by Google One and YouTube Premium.
- Net income increased 33% to $35 billion and EPS grew 35% to $2.87; free cash flow of $24.5 billion in Q3.
What went wrong
- A $3.5 billion charge related to the European Commission fine cut reported operating margin to 30.5% (33.9% excluding the fine) and reduced Google Services operating margin to 38.5%.
- Network advertising revenue declined 3% to $7.4 billion.
- Depreciation increased $1.6 billion YoY to $5.6 billion (41% growth), expected to accelerate slightly in Q4.
- Cloud remained supply-constrained; tight demand-supply environment expected to persist into Q4 and 2026.
- Other Bets operating loss widened to $1.4 billion (revenue $344 million).
- Q4 advertising comparisons expected to be negatively impacted by lapping strong 2024 U.S. election spend, particularly on YouTube.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Full-year CapEx | FY2025 | $91 billion-$93 billion |
| CapEx direction | FY2026 | significant increase expected (details on Q4 call) |
| Depreciation growth rate | Q4 2025 | expected to accelerate slightly |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Consolidated revenue | +16% (15% cc) | Double-digit growth across Search, YouTube ads, subscriptions, and Cloud; first $100B+ quarter. |
| Google Search and other revenue | +15% | Growth across all major verticals, largest contributions from retail and financial services; AI experiences expanding queries. |
| YouTube advertising revenue | +15% | Driven by direct response advertising, followed by brand. |
| Network advertising revenue | -3% | Continued network decline. |
| Subscriptions, platforms and devices revenue | +21% | Very strong growth in YouTube and Google One subscriptions. |
| Google Cloud revenue | +34% | GCP grew much faster than Cloud overall; enterprise AI infrastructure and solutions plus Gemini 2.5 demand; GenAI-product revenue up 200%+. |
| Google Cloud operating income | +85% (margin 17.1%->23.7%) | Strong revenue and expense efficiencies, partly offset by higher technical infrastructure usage costs including depreciation and energy. |
| Google Services operating income | +9% | Margin fell to 38.5% as revenue growth and efficiencies were offset by the EC fine fully reflected in the segment. |
| Alphabet operating income | +9% (+22% ex-EC fine) | Operating margin 30.5% (33.9% ex-fine); revenue growth offset by the legal charge and higher depreciation. |
| Net income | +33% | Grew to $35 billion, aided by $12.8 billion of other income from unrealized gains on non-marketable equity securities. |
| Earnings per share | +35% | Net income growth and lower share count; EPS $2.87. |
| Other Bets revenue | $344 million (operating loss $1.4 billion) | Continued investment, with more resources to Waymo. |
| Depreciation expense | +41% | CapEx build-out flowing to depreciation; $5.6 billion in the quarter. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Monthly tokens processed across surfaces | 980 trillion (July) | over 1.3 quadrillion (20x growth in a year) | — |
| Cloud backlog | $106 billion (Q2) | $155 billion (+46% sequential, +82% YoY) | — |
| Gemini app monthly active users | 450 million (Q2) | over 650 million | — |
| Full-year 2025 CapEx outlook | ~$85 billion | $91 billion-$93 billion | — |
| First-party model token throughput | not previously disclosed at this cadence | 7 billion tokens per minute via direct API | — |
| Paid clicks / CPCs (per 10-Q) | paid clicks +4% YoY (Q2) | paid clicks +7% YoY, CPCs +7% YoY | — |
| GenAI-model product revenue growth | not disclosed at this rate prior | more than 200% YoY | — |
Q&A Summary
Brian Nowak (Morgan Stanley): Ensuring a smooth transition to agentic e-commerce (which some fear monetizes lower), and how far off Waymo integration with Gemini/user data is.
Schindler: Agentic experiences are additive; working across travel, commerce, and shopping with a seamless UX and partner ecosystems (PayPal, agentic checkout, agent-to-agent protocol). Pichai: Waymo scaling in 2026; real opportunity to improve the in-car experience with Gemini multimodality and YouTube; new experiences coming in 2026.
Doug Anmuth (JPMorgan): Drivers of core Search strength (clicks per query, conversion, pricing in AI formats), and where cost efficiencies exist to absorb infrastructure/depreciation growth.
Schindler: Growth across all major verticals (retail, financial services, healthcare); AI Overviews monetize at approximately the same rate at current baseline; paid clicks and CPCs each up 7% YoY. Ashkenazi: Ongoing (not one-time) efficiency via moderating headcount, real estate optimization, efficient in-house data centers, AI coding (nearly half of code AI-generated), and Shorts' lower revenue share aiding gross margin.
Eric Sheridan (Goldman Sachs): Opportunity from each generation of custom silicon (internal efficiency and external monetization), and scaling of YouTube subscriptions alongside ads.
Pichai: Substantial demand for AI infrastructure (TPU- and GPU-based); full-stack approach and own-model differentiation support continued Cloud margin and revenue growth. Schindler: YouTube is a flywheel with a twin-engine (ads + subscriptions) strategy; a Music/Premium subscriber generates meaningfully higher gross profit than an ad-supported user.
Mark Shmulik (Bernstein): Differences in behavior/engagement for AI Mode/Overviews users, and how Search economics evolve vs. incremental cost to deliver AI results.
Pichai: AI Overviews are a natural part of Google with high engagement; AI Mode has a passionate core of early adopters seeking it out; usage and satisfaction rise over time. Schindler: AI Overviews monetize at approximately the same rate (a baseline for innovation); testing ads in AI Mode; opportunity to monetize historically under-monetized queries.
Michael Nathanson (MoffettNathanson): Impact of longer AI Mode query length on ROAS, and how Ashkenazi evaluates ROIC internally after a year at Alphabet.
Schindler: AI Mode at 75M+ DAU with queries doubling; still testing ads, too early for details. Ashkenazi: Returns already visible in Cloud (billions from AI in the quarter); a rigorous framework evaluates potential return and time frame across Cloud, ads (search transformation), and YouTube before investing.
Ross Sandler (Barclays): How new monetization products like AI Max increase the ~20% commercial-query share.
Schindler: AI Max improves advertisers' ability to target a wider range of queries; separately AI Mode increases queries; over time non-commercial queries with adjacent commercial relationships can be expanded into ad offerings. Pichai: AI Overviews and AI Mode dramatically improve Search across universal needs, which will apply to commercial categories over time.
Ken Gawrelski (Wells Fargo): Confidence that a larger engagement market also grows the marketing/revenue market, and how AI Mode, AI Overviews, and traditional Search coexist over 12-24 months.
Pichai: A dynamic, expansionary moment; over time experiences will be simplified as with universal search while meeting users where they are; two surfaces (Search + Gemini) serve the breadth of needs, and a portion of increased engagement is commercial.
Justin Post (BofA): Pace of frontier-model innovation (is it slowing?), and any change in economics/profitability of large Cloud deals.
Pichai: Pace is phenomenal and increasing, though notably improved models sometimes take longer; excited for Gemini 3.0 later this year. On Cloud: more $1B+ deals in the first three quarters than the prior two years; full-stack, own-technology differentiation supports a good long-term economic trajectory.
More on Alphabet Inc.
Reported 2025-10-29 · figures from the Alphabet Inc. Q3 2025 earnings call.
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