Shares of Google parent Alphabet (GOOG, GOOGL) rose 6% in after-hours trading Tuesday after the company reported third-quarter earnings that beat analyst expectations on the top and bottom lines, helped by strong growth of its cloud activities.

The search giant reported earnings per share of $2.12 on revenue of $88.27 billion for the quarter ended September 30. This represents an increase in profit and turnover compared to the same period last year of 37% and 15% respectively.

Analysts had expected earnings per share of $1.83 on revenue of $86.44 billion, according to Bloomberg data.

Advertising revenue was $65.85 billion, compared to analyst expectations of $65.5 billion, up from $59.65 billion in the same period last year.

Google CEO Sundar Pichai highlighted the cloud unit’s growth in an earnings call on Tuesday, noting that the company’s AI portfolio is attracting new customers and leading to bigger deals. Cloud revenue reached $11.4 billion, up 35% from the same period last year, exceeding expectations.

“This company has real momentum and the overall opportunity is increasing as customers embrace gen. AI,” he said.

The rise in cloud revenues comes as rivals Microsoft (MSFT) and Amazon (AMZN) are also expected to grow their cloud businesses and ramp up investments in AI infrastructure. Google plans to spend about $13 billion on capital expenditures this quarter, CFO Anat Ashkenazi said on the call. And the company expects another increase in spending on AI and data infrastructure in 2025.

Google also faces competition on its own turf as it introduces increasingly sophisticated AI-powered chatbots. On Monday, the Information reported that Meta (META) is developing its own search engine to power its Meta AI chatbot, giving users conversational answers to their questions and prompts.

How the next generation of answer engines compete with Google’s traditional and AI-powered searches remains a key question for the company.

Pichai described the expansion of AI search tools as improving the user experience. AI Overviews, Google’s search tool that provides concise answers to user questions, now reaches 1 billion users every month, the company announced Monday.

“People are asking longer and more complex questions and exploring a wider range of websites,” Pichai says. “What’s especially exciting is that this growth will actually increase over time as people learn that Google can answer more of their questions.”

As with older search results, users will see ads that Google places next to AI overviews.

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