How Google (Alphabet) Makes Money: Advertising and Cloud

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Google makes most of its money from advertising. Its parent company, Alphabet, sells ad space across Google Search, YouTube and millions of partner websites and apps, and advertising made up about 69% of Alphabet’s total revenue in the six months ended June 30, 2026. The rest comes mainly from Google Cloud (infrastructure, data analytics and Workspace subscriptions for businesses) and from consumer subscriptions, app store fees and hardware such as YouTube Premium, YouTube TV, Google Play and devices. A small slice comes from experimental ventures grouped as “Other Bets,” led by the self-driving company Waymo.

The free products, including Search, Chrome, Android, Maps and Gmail, are how Google reaches its audience. Advertisers pay to reach that audience at the moment it is searching, watching or browsing.

How Google’s Advertising Business Works

Google’s ad revenue comes from three places: ads on its own search results, ads on YouTube, and ads it places on other companies’ websites and apps. Each works a little differently.

Search ads and the Google Ads auction

When you type a query, Google’s automated systems produce the organic (unpaid) results they judge most relevant. Separately, a Google Ads auction decides whether any sponsored ads appear on the page and in what position. Advertisers bid on the searches they want to show up for, and they compete with each other for the top slots.

The auction is not won on price alone. Ad position depends on Ad Rank, which combines the advertiser’s bid with factors such as ad quality and relevance to the search. That design matters for Google’s revenue: an ad that users find irrelevant earns nothing if nobody engages with it, so ranking quality alongside price helps keep both users and advertisers coming back.

Google charges advertisers when users engage with an ad. Depending on the campaign, the trigger can be a click (cost per click) or the ad simply being seen (impressions). Search ads are especially valuable because the user has just stated what they want. Someone searching “running shoes size 10” is closer to buying than someone scrolling a social feed, and advertisers pay for that intent.

YouTube ads

YouTube sells video ads that play before, during or alongside content, plus display formats on the site and app. YouTube also brings in non-advertising money through YouTube Premium (ad-free viewing) and YouTube TV (a paid live-TV streaming service). Those subscription fees are counted outside advertising, which is one reason Google Services revenue is larger than Google’s ad revenue alone.

Google Network and AdSense

The Google Network revenue line covers ads Google places on properties it does not own. The best-known program is AdSense, which lets website owners add Google display ads to their pages. AdSense works much like Google Ads, except the ad appears on a third-party site. When it does, the site owner receives a share of the ad revenue and Google keeps the rest. Payment may be based on clicks or impressions, depending on the ad.

For Google, the network extends its advertising reach far beyond its own pages. For the publisher, it means monetizing traffic without building an ad sales team. Because Google shares much of this money with partners, network revenue carries a lower margin for Google than ads on Search or YouTube.

Traffic acquisition costs

Google reports advertising revenue before paying partners, and it records those payments as traffic acquisition costs (TAC). TAC has two parts:

• Payments to network partners, such as the AdSense share paid to website owners.
• Payments to distribution partners, such as browser makers, phone manufacturers and carriers that make Google the default search engine on their devices.

The second category is central to the antitrust case discussed below. Making Google the default search option keeps search traffic, and therefore search ad revenue, flowing through Google rather than a rival.

Revenue That Doesn’t Come From Advertising

Advertising is dominant, but Alphabet has built several other revenue streams.

Subscriptions, platforms and devices. This group, reported within Google Services, includes:

• App sales and in-app purchases through Google Play, where Google takes a fee on transactions made through the store
• Digital content products
• Subscription products such as YouTube Premium and YouTube TV, and consumer storage subscriptions such as Google One
• Hardware, including Pixel phones and Nest and Fitbit devices

Android sits underneath much of this. Google does not need to charge phone makers heavily for Android itself to profit from it: Android puts Google Search, Chrome, Maps and Google Play in front of users, which feeds both ad revenue and Play Store fees.

Google Cloud. Businesses pay fees for Google Cloud Platform (computing power, storage, data analytics and AI infrastructure) and for Google Workspace, the collaboration suite formerly called G Suite (business Gmail, Docs, Drive, Meet and similar tools). This is the main source of Alphabet’s non-advertising growth.

Other Bets. These ventures earn comparatively little. Most of the segment’s revenue now comes from autonomous transportation (Waymo) and internet services.

Google Revenue Breakdown by Segment

Alphabet began reporting three segments in the fourth quarter of 2020 and still uses that structure. Before then, it split its results into just Google and Other Bets.

Here is how the segments compared over the first nine months of 2024. Share of revenue and operating margin are calculated from the reported figures, using Alphabet’s total nine-month revenue of $253 billion.

Google Services

Google Services includes Search, YouTube, Android, Chrome, Google Maps, Google Play and hardware. Advertising through Search and YouTube is its primary revenue source, with the subscription, Play and device income described above adding to it.

Two figures stand out. At roughly 40 cents of operating income per dollar of revenue, Google Services is far more profitable than the other segments. And on its own it earned more operating income ($88.4 billion) than Alphabet earned as a whole ($81.4 billion) over the same nine months, because Other Bets’ losses and unallocated corporate costs pull the company-wide total down.

Note that the segment’s 87% share of revenue is a different measure from advertising’s share. Google Services also includes subscriptions, Play and hardware, and the 69% advertising figure cited above covers a different period (the first half of 2026), so the two numbers should not be subtracted from each other.

Google Cloud

Google Cloud brought in $31.3 billion in the first three quarters of 2024 and earned just over $4 billion of operating income. Its margin, around 13% on these figures, is much thinner than Google Services’, which reflects the cost of building and running data centers. The more important shift is direction: the segment has posted operating income since 2023 after years of losses, turning Cloud from an investment into a second profitable business.

Other Bets

Other Bets groups operations that are not individually material to Alphabet’s results. Waymo, the autonomous driving business, is the best known. Over the first nine months of 2024, the segment reported $1.2 billion of revenue against an operating loss of about $3.3 billion. These are long-term bets funded by the advertising business, not current profit sources.

Costs outside the segments

Alphabet also reports certain costs it does not assign to any segment, including corporate initiatives, finance and legal costs, and some shared research and development. These are excluded from the segment figures. That explains why segment operating income for the nine months of 2024 adds up to about $89.1 billion ($88.4 billion + $4.0 billion − $3.3 billion), while Alphabet’s total operating income was $81.4 billion. The gap of roughly $7.7 billion reflects these Alphabet-level items.

Alphabet’s Revenue and Profit

Alphabet reported revenue of $253 billion for the first nine months of 2024, a 14% increase over the $221 billion it reported for the same period of 2023.

Profit grew faster than revenue:

• Operating income was $81.4 billion, up from $60.6 billion in the first three quarters of 2023, an increase of about 34%.
• Net income was $73.6 billion, up nearly 39% from the year-earlier period.
• Operating margin works out to about 32% ($81.4 billion ÷ $253 billion).

Part of that came from Cloud swinging into profitability, and part from the scale of the core ad business.

Revenue per day, as an illustration. Dividing $253 billion by the 274 days from January 1 through September 30, 2024 (a leap year) gives roughly $923 million in revenue per day. This is an average over the period. Actual daily revenue varies with seasonal ad demand, including the holiday quarter, which falls outside this window.

Where the Money Goes: AI and Research

Much of what Google earns is reinvested in research and in the computing infrastructure behind artificial intelligence. AI is already built into the revenue engine: Google Search uses it to interpret what users mean, and Google Ads uses it to decide ad placement.

Google first showed AI-generated summaries in search in May 2023. These summaries, displayed at the top of results pages, were rolled out broadly under the name AI Overviews in 2024, and some early errors drew negative press. The product matters to the business model because it changes what sits at the top of the results page, the same space where search ads appear.

Google’s family of AI models is called Gemini. In July 2024, Google said Gemini came in four model sizes, and that Gemini 1.5 Pro offered a two-million-token context window, which Alphabet described as the longest among large-scale foundation models. A larger context window means a model can take in and respond to far more text at once. Developer adoption has grown quickly: about 1.5 million developers were using Gemini across Google’s developer tools in July 2024, according to CEO Sundar Pichai, and by July 2025 Alphabet said nine million developers had built with Gemini.

Spending on research rose more modestly than in earlier years. Alphabet spent about 7.7% more on R&D in the first half of 2024 than in the first half of 2023. Investors’ bigger concern has been the heavy capital spending on AI infrastructure such as data centers and chips. Pichai’s position on earnings calls was that “the risk of underinvesting is dramatically greater than the risk of overinvesting.” His reasoning was that the infrastructure has long useful lives and can be used across Google’s businesses even if some of it proves excessive. The underlying worry is defensive: if AI becomes the future of search, letting rivals get ahead could damage the business that generates most of Alphabet’s money.

That same infrastructure supports Google Cloud, which sells computing power and AI tools to enterprise customers. AI spending therefore serves two purposes: protecting search advertising and building the cloud business.

The 2024 Antitrust Ruling and What It Means for Google’s Revenue

In 2024, the U.S. District Court for the District of Columbia ruled that Google unlawfully maintained monopolies in U.S. general search services and general search text advertising. The case was brought by the U.S. Department of Justice and a large group of states. It is widely described as one of the most significant technology rulings since the Microsoft antitrust case of the 1990s.

“Google is a monopolist, and it has acted as one to maintain its monopoly,” Judge Amit P. Mehta wrote in the 277-page decision. The court found that by 2020 Google held almost 90% of general search services, and 95% on mobile devices. It also found that Google paid billions of dollars to smartphone makers and wireless carriers, including Samsung and Apple, to be the default search engine on their devices and platforms. Apple alone reportedly received an estimated $20 billion from Google in 2022 for default search status.

The ruling goes to the heart of the business model described above. Search text ads are Google’s core product, and default placement payments are part of the traffic acquisition costs Google pays to keep search traffic coming. Google said it would appeal. Jonathan Kanter, then head of the DOJ’s antitrust division, called the decision a landmark that holds Google accountable.

The financial stakes reach beyond Google. If default search deals are restricted or banned, companies that receive those payments, such as Apple, could lose a meaningful revenue stream. For Google, the risks run in two directions: it could lose search share if defaults change, but it could also stop paying some of those acquisition costs. The ruling also fits a wider push by U.S. regulators. The DOJ and Federal Trade Commission have sued Amazon, Apple, Meta and Google (twice), arguing that dominant tech platforms need more competition.

For users, the long-term effect is uncertain. More competition could bring better products, but changes to Google’s business model could also affect the free services that advertising currently pays for.

Who Google Competes With

Because Alphabet runs several businesses, its competitors vary by market. They include Microsoft (search, cloud and productivity software), Amazon (cloud through AWS, plus product search and retail advertising), Meta (digital advertising), Apple (mobile operating systems, app stores and devices) and Alibaba Group (cloud and commerce in Asia). Broadly, Alphabet competes with any company that connects people with information and advertising, any digital content or app platform, and any enterprise cloud provider.

History: From Google to Alphabet

Google went public in August 2004. In 2015, co-founder Larry Page announced a reorganization that created Alphabet as a new holding company. Page wrote that the change would open up opportunities within Google and give the company room to build new ventures, including investments in technologies such as artificial intelligence and drone delivery.

Under the reorganization, Alphabet became Google’s public parent and Google became a wholly owned subsidiary. The existing shares carried over: Alphabet’s Class A and Class C shares continued trading on the Nasdaq under the tickers GOOGL and GOOG.

The structure explains the segment reporting. Google, with its ad, app, hardware and cloud businesses, sits at the center, while ventures such as Waymo, Wing (drone delivery) and Calico (health and biotechnology research) report as Other Bets. Holdings change over time: in April 2026, the life sciences company Verily said Alphabet would remain a significant minority investor without a controlling stake.

Share Classes and Major Shareholders

Alphabet has three classes of common stock:

• Class A (GOOGL): traded on the Nasdaq, with voting rights of one vote per share.
• Class B: not publicly traded. These shares carry 10 votes each and are held mainly by insiders, which gives the founders outsized voting control.
• Class C (GOOG): traded on the Nasdaq, with no voting rights. They are widely held by public and institutional investors.

For investors, A and C shares give the same economic exposure to Google’s ad and cloud earnings. The difference is the vote.

According to Alphabet’s voting-share disclosures as of April 6, 2026, Larry Page and Sergey Brin were the largest individual holders of Class B shares, and L. John Doerr held more Class B shares than Sundar Pichai held in Class A shares. Those disclosures exclude Class C holdings. Among institutions, BlackRock was a major disclosed holder, while Vanguard-affiliated holdings were reported through separate subsidiaries rather than under The Vanguard Group itself.

FAQs

The Bottom Line

For investors and anyone tracking Alphabet, the core fact is that search and YouTube advertising pay for nearly everything else, including AI infrastructure, Cloud and the money-losing Other Bets. Google Cloud's move into profit gives Alphabet a second earnings engine, but the 2024 antitrust ruling targets search text ads and default deals, the center of the model. Any change to default placements or search results pages would hit the business that generates most of Alphabet's money.