Google parent Alphabet said Tuesday its investments in AI are “paying off,” after reporting a 35% increase in its cloud business and U.S. election-related spending boosting YouTube ad sales in the third trimester.

Alphabet shares rose nearly 6 percent in after-hours trading Tuesday. Shares of Amazon and Microsoft, the leading cloud computing companies, rose about 1 percent after the close.

Alphabet beat revenue and profit expectations for the third quarter. Its core search business jumped 12%, as did YouTube ad revenue.

“Alphabet is the first big name in the technology sector to report results, and it did not disappoint,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Cloud growth has been strong… which continues to support the argument that major cloud providers are well-positioned to benefit from the AI ​​revolution.”

Perceived as slow to catch up with Big Tech rival Microsoft in the AI ​​race, Google has beefed up its Gemini AI chatbot and improved its AI-powered search.

The company continues to invest heavily in AI.

Its new CFO, Anat Ashkenazi, responded to her first analyst call and said Alphabet’s capital spending in 2025 would be higher than this year.

In the third quarter, Alphabet’s investments increased 62 percent to $13 billion. The fourth quarter should be similar, she said.

Some analysts said Alphabet’s quarter looked impressive compared to low expectations, and that its small but growing cloud business could slowly offset a slowdown in its advertising business.

Google’s long-established dominance in the digital advertising market is under threat from Amazon and TikTok, which have become popular with advertisers looking to tap a pool of available buyers. Its research business also faces scrutiny from regulators seeking to break up the company.

But its cloud business grew the fastest in eight quarters – to $11.35 billion – as companies doubled their spending on the cloud, which is essential to making artificial intelligence technologies work. Analysts estimate it at $10.86 billion.

“I think it was an impressive quarter, because the fact that Google Cloud was able to more than offset the decline in search is a testament to both the growing importance of cloud revenue and the fact that the company continues to diversify its revenue base,” said Bob O’Donnell, president of TECHnalysis Research.

Google has rolled out ads in AI Previews, which uses generative AI to summarize content from a range of sources and display concise results for search queries.

Analysts said users believe the company’s new AI tools are more effective than before – a significant improvement from earlier this year, when the feature drew heavy criticism for displaying inaccurate answers, including a pizza recipe that listed glue as an ingredient.

Alphabet also beat expectations with earnings of $2.12 per share, compared to the market average estimate of $1.85, according to LSEG.

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“We had a slight tailwind from election-related ad spend in the third quarter, which was a little more pronounced in YouTube ads,” Philipp Schindler, Google’s chief commercial officer, said in a conference call after the results.

Social media company Snap, which also relies on advertising, released good news for shareholders, beating Wall Street targets for quarterly revenue and user growth, sending its shares higher by 6% after hours.

Alphabet’s digital advertising sales – the largest share of its total revenue – increased 10 percent to $65.85 billion in the third quarter. But this growth rate slowed from the second quarter.

“I fully expect Google to start losing share in the advertising market over the next two to three years,” said Angelo Zino, senior equity analyst at CFRA Research. “Clearly, as we move towards a more AI-driven market, competitive pressures are going to increase.”

Google’s share of U.S. search advertising revenue is expected to fall below 50 percent next year, for the first time in at least 18 years, according to eMarketer data. At the same time, Amazon’s share is expected to increase from 22 percent this year to 24 percent.

Alphabet’s total revenue rose 15 percent to $88.27 billion in the July-September period, compared with analysts’ average expectations of $86.30 billion, according to LSEG data. The company’s smartphone launch progress this year has helped boost revenue.