Alphabet's contingent commitments jumped by roughly $23 billion in a single quarter, driven by data center leases, partner equipment support, and potential obligations to repurchase AI chip systems. Meanwhile, the company faces scrutiny over whether joint ventures are artificially puffing up its $560.8 billion cloud backlog. Core search operations are also slowing down, with paid click growth dropping to 8% in the third quarter. To counter the revenue drag from lower monetization on AI Mode queries, Alphabet is expanding AI Mode advertising to international markets.
Key points
Disclosed contingent commitments indicate Alphabet is absorbing substantial financial exp…: Disclosed contingent commitments indicate Alphabet is absorbing substantial financial exposure to build out and support its artificial intelligence infrastructure.
Investor scrutiny is increasing over whether cloud growth reflects independent commercial…: Investor scrutiny is increasing over whether cloud growth reflects independent commercial demand or internally backed joint ventures.
Softening paid search click growth and reduced monetization on AI queries are pushing Alp…: Softening paid search click growth and reduced monetization on AI queries are pushing Alphabet to accelerate international advertising deployment.
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The filing on Thursday shows Alphabet could face another $98.5 billion in contingent commitments under certain conditions, up about $23 billion from the previous quarter. These include guarantees for data centre leases, financial backing for partners buying power equipment and potential obligations to repurchase AI chip systems from customers.
The disclosures come as investors scrutinise whether surging AI expenditure will generate adequate returns.
Also Read: Nasdaq slides over 1% as Alphabet's AI spending revives investor concerns
Cloud backlog raises questions over growth quality
Google Cloud’s backlog climbed to $560.8 billion at the end of September from $513.9 billion three months earlier. However, $16.8 billion of the backlog is linked to Crux AI, a joint venture Alphabet established with Blackstone, according to the filing cited by Bloomberg.Alphabet owns a minority stake in the venture and has pledged up to $10 billion in data centre and energy backstops to support it.
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The arrangement raises questions about how much of the cloud division’s growth comes from independent customers…
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