Bolstered by ads on smartphones and YouTube, Google Inc. parent company Alphabet Inc. posted a 23 percent jump in profits on a similar rise in revenues for its third quarter.

The company said it earned a profit before certain expenses such as stock compensation of $9.06 a share, up from $7.35 a year ago, on a 20 percent rise in revenues (23 percent in constant currency), to $22.5 billion. Analysts had predicted Alphabet would post profits of $8.64 a share, up 17 percent from a year ago, on revenues of $22.05 billion, up 18 percent.

Investors at least appeared moderately satisfied with the company’s outperformance. Following a slight decline in today’s session before the earnings report, shares rose almost 2 percent in initial after-hours trading before falling back to under a 1 percent rise.

Google Chief Executive Sundar Pichai (above) called out the company’s cloud business, among other segments, in comments during the earnings conference call. “We feel well positioned as we transition to a new era of computing,” he said. “With our growing cloud business, we are helping our enterprise customers take advantage of this new era of computing as well. … The team is firing on all cylinders.”

Alphabet Chief Financial Officer Ruth Porat added that the cloud business is “generating substantial revenue growth.” In fact, she said, the Google Cloud Platform is generating the highest percentage growth of all its product lines, though that’s on a far lower base than for advertising businesses.

Keeping that momentum going will require more spending on data centers, such as eight new regions planned to be built worldwide next year. “In the coming year, I expect cloud to be one of our largest areas of investment,” Pichai said.

With close to 90 percent of Alphabet’s revenues still coming from advertising, other businesses and projects such as phones, Internet service and cloud computing contribute a tiny portion of revenues. And the long-term “moonshot” bets such as Internet service and life sciences research are largely losing money, some $865 million on revenues of $197 million in the third quarter, though that loss was down from $980 million a year ago. Google recently put a hold on expansion of its Fiber Internet service project.

But beyond the moonshots, Google’s “other revenues” segment that specifically includes cloud and enterprise computing, apps and other entertainment and hardware, is growing fast. Revenues rose 39 percent in the third quarter, to $2.4 billion, a higher growth rate than the second quarter’s 33 percent.

Google has been pushing especially hard into cloud computing, close to a year after buying onetime VMware cofounder Diane Greene’s startup and hiring her to head enterprise and cloud operations. The company aims to leverage its own massive network and computing infrastructure while making sure it doesn’t get edged out by leading rivals Amazon Web Services and Microsoft Azure in the cloud, a key touchpoint and growth area for all Internet services.

But it still has a long battle ahead. “Google’s cloud services will really have arrived when it has to start breaking out the financial performance in its reporting, as Amazon had to do with AWS a while back,” said Jan Dawson, chief analyst with Jackdaw Research. “For now, it’s still more a vision than a reality.”

Now it’s up to Google to execute more forcefully on its non-advertising businesses, said Ben Schachter, an analyst with Macquarie Securities. “With new hardware, cloud, and AI becoming more important every day, GOOG is in an enviable position,” he said in a note to clients. “It has very large new opportunities, but it must execute.”

Leading the way on growth in the quarter after the Google Cloud were its video site YouTube and Google Play, its apps and entertainment store. YouTube is believed to be approaching a $10 billion annual run rate mostly from advertising, growing at least 30 percent, according to RBC Capital.

Google had a lot to live up to, and it still does. Investors on Tuesday pushed Alphabet shares, already on a tear lately, up to a new all-time high of $838.50, before shares fell back later Tuesday and the last two days.

Along with Facebook Inc., Google remains dominant in online advertising. “Revenue growth trends seem pretty clear with Google reinforcing its co-hegemonic position alongside Facebook on an ongoing basis,” Pivotal Research Inc. analyst Brian Wieser said in a note to clients today. “YouTube is making progress in capturing share of online video while also making an increasingly plausible case for capturing traditional television budgets.”

But with Facebook charging hard with mobile display and video ads that run in its central news feed, Google’s search ads are no longer the chief driver of online ad growth. Advertisers are flocking to Facebook because they think its targeting of precise consumer segments is even better than Google’s.

Google took steps last month to improve targeting with more primary data, instead of having to rely on web identification markers called cookies, which don’t work on mobile devices. “Google hopes this approach will help it to compete more aggressively against Facebook on mobile, as marketers increasingly invest in the channel,” Jon Schulz, chief marketing officer of the ad tech firm Viant Technology LLC, said in an email. “It is a smart move for Google.”

Photo by Robert Hof