Diving brief:

• Google’s advertising revenue increased 10% year over year to $65.85 billion in the third quarter. according to a results report of parent company Alphabet.
• Search and other, the tech company’s largest segment, grew 12% year over year to $49.39 billion, driven by healthy demand from financial services and retail marketers . Video platform YouTube also saw growth of 12% over the period, reaching $8.92 billion in revenue.
• Cloud computing services were another bright spot in a quarterly report that beat analysts’ expectations on key metrics. However, Google faces a cloudy future amid a regulatory crackdown on its search and ad tech giants.

Dive overview:

Seen in a vacuum, Google had a strong third quarter, beating earnings and revenue expectations and posting strong performance on the advertising front. Looking at the bigger picture, the company has never been in such an uncertain situation.

Google was sentenced in August to maintain an illegal monopoly on researcha landmark deal that threatens its largest and strongest revenue driver. Google plans to appeal the decision, which could open the way for search rivals who have long vied for a larger share of a lucrative market.

The tech giant faces a separate antitrust challenge from the Justice Department. linked to its ad tech network, which recently completed a three-week trial. Two intense regulatory battles come as Google attempts to reshape its business around generative artificial intelligence (AI), a race for victory in an emerging sector that has was also challenged in court.

When discussing third-quarter results with investors, executives were reluctant to comment on pending litigation but reinforced their argument that Google’s dominant stature is the result of a superior product.

“First, we plan to vigorously defend these cases. And some of the early DOJ proposals, et cetera, are far-reaching,” said CEO Sundar Pichai on the earnings call. “I think they could have unintended consequences, particularly for the dynamic technology sector and for U.S. leadership in that sector.”

Google also made organizational changes in the third quarter that could affect the future of its advertising strategy. In September he appointed Nick Fox to head Google’s search and advertising divisionreplacing Prabhakar Raghavan. Raghavan, a longtime Google executive, is now the company’s chief technologist.

Fox becomes the first search engine under the name Google expands ad deployment in AI previewsa generative AI feature that condenses responses from the web into a single window. Pichai said the AI ​​previews have so far seen strong user engagement and satisfaction. Google also implemented more AI-driven purchasing in searchwhich could help it take advantage of the busy holiday season.

Other Google AI tools, including its Gemini software, are used to help advertisers with creative asset generation, media buying and measurement. An Audi campaign that leveraged Google’s AI to generate video images and text for links appearing in long-form videos increased visits to the automaker’s website by 80% and increased sales, according to Philipp Schindler, Chief Commercial Officer of Google.