Google's most recent quarterly results provide new proof that its massive internet business is not only surviving the disruption caused by artificial intelligence, but is actually using it as a major growth engine.

Google revealed its third consecutive quarter of more than 10% year-over-year growth in digital advertising in its earnings on Wednesday. Meanwhile, during the October–December period, revenue from the division that powers data centres for AI services increased by more than 30%.

Alphabet Inc., the parent company of Google, easily exceeded Wall Street expectations thanks to the impressive performance. While overall revenue increased by 18% to USD 113.8 billion, Alphabet's fourth-quarter profit increased by 30% to USD 34.5 billion, or USD 2.82 per share.

A company founded during the internet boom of the late 1990s, Google is becoming even more powerful in the face of a new technological shift almost thirty years later. This is demonstrated by the combined strength of its core search and advertising businesses as well as the quick advancements in artificial intelligence.

“Search saw more usage than ever before, with AI continuing to drive an expansionary moment,” Alphabet CEO Sundar Pichai said.

Investor confidence in Google’s transformation has helped lift Alphabet’s share price nearly 60 per cent over the past five months, pushing its market valuation to around USD 4 trillion. However, heightened expectations appeared to weigh on sentiment, with the stock slipping about 1 per cent in extended trading after the earnings release.

Apple, which also carries a market value of roughly USD 4 trillion, has shown confidence in Google’s AI capabilities by signing a deal to use Google’s Gemini technology in a long-awaited upgrade to its virtual assistant, Siri.

Google is further integrating Gemini AI into its flagship products, including search, Gmail and the Chrome browser, as it works to stay ahead of fast-rising rivals such as OpenAI, Anthropic and Perplexity.

To sustain this momentum, Alphabet has significantly increased spending on AI infrastructure. After investing USD 91 billion in capital expenditures last year—largely focused on AI—the company is expected to spend even more in the current year. Annual capital spending has risen sharply from around USD 30 billion in 2022, following the launch of OpenAI’s ChatGPT, which intensified competition in the AI space.

Google’s robust advertising business continues to bankroll this expansion. Digital ad revenue reached USD 82.3 billion in the fourth quarter, up 14 per cent from a year earlier. Meanwhile, Google Cloud, which runs the data centres supporting many AI services, recorded revenue of USD 17.7 billion, marking a 48 per cent increase.