Alphabet’s (GOOGL Quick QuoteGOOGL - Free Report) third-quarter 2023 results, scheduled to be released on Oct 24, are likely to reflect strength in its cloud arm, Google Cloud.

Google Cloud has turned out to be the key catalyst for Alphabet’s growth on the back of its strengthening cloud-service offerings.

GOOGL’s cloud offerings include Google Cloud Platform and Google Workspace, which are continuously gaining momentum in the booming cloud computing market. Google’s growing investments in infrastructure, security, data management, analytics and AI remain major positives.

Alphabet has been consistently witnessing strong revenue growth generated by the underlined segment, which derives revenues from fees collected for Google Cloud Platform services and Google Workspace collaboration tools.

Revenues from the segment were $8.03 billion in second-quarter 2023. The figure accounted for 10.8% of total revenues and exhibited year-over-year growth of 28%.

For third-quarter 2023, the Zacks Consensus Estimate for Google Cloud revenues is pegged at $8.54 billion, suggesting growth of 24.3% from the prior-year quarter’s reported figure.

Click here to know how Alphabet’s overall third-quarter performance is likely to have been.

Factors to Consider

Google’s strengthening efforts toward expanding its cloud services portfolio, data centers, availability zones and regions are likely to have helped it gain strong customer momentum in the highly competitive cloud market.

The company’s deepening focus on generative AI might have been a major positive.

In the third quarter, GOOGL announced the general availability of A3 virtual machines, which are designed to cater well to the growing demand for generative AI workloads and large language models.

This also added strength to Google’s supercomputing capabilities.

The growing momentum in its generative AI-backed helper, Duet AI, might have contributed well. The company announced the general availability of Duet AI for Gmail, Drive, Docs and more in the quarter to be reported.

This apart, the company strengthened its Kubernetes offerings by launching a new enterprise version of its Google Kubernetes Engine.

GOOGL’s efforts in integrating data lakes, data warehouses, data governance and advanced machine learning into a single platform are expected to have bolstered its prospects in the data cloud market during the to-be-reported quarter.

Google’s amplifying focus on providing a secure cloud infrastructure owing to its growing cybersecurity efforts might have been another positive.

All these endeavors are likely to have contributed well to the third-quarter performance of Google Cloud.

Zacks Rank & Stocks to Consider

Currently, Alphabet has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Dell Technologies (DELL Quick QuoteDELL - Free Report) , Applied Materials (AMAT Quick QuoteAMAT - Free Report) and Arista Networks (ANET Quick QuoteANET - Free Report) . While Dell Technologies sports a Zacks Rank #1 (Strong Buy), Applied Materials and Arista Networks each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dell Technologies shares have gained 68.8% in the year-to-date period. DELL’s long-term earnings growth rate is currently projected at 12%.

Shares of Applied Materials have increased by 58.1% in the year-to-date period. AMAT’s long-term earnings growth rate is currently projected at 6.10%.

Arista Networks shares have gained 44.2% in the year-to-date period. The long-term earnings growth rate for ANET is currently projected at 18.75%.

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