Alphabet Inc. returned to growth in the third quarter after a decline in the previous period, fueled by digital advertising that has rebounded along with the American economy. The shares rose about 3% in New York trading.
The Google parent reported third-quarter revenue, minus the cost of distribution deals for its search engine, rose 15% to $38 billion. While that was slower than the pace of growth a year ago, it was a stark change from the the 2% drop in the second quarter and better than what analysts were expecting. YouTube, the fastest-growing part of Google's ad business, brought in $5 billion, 32% more than last year.
About 90% of Google's revenue stems from advertising, much of it linked to search results. That business ground to a halt in the spring, as the pandemic decimated some of its biggest clients: travel and tourism companies. But as lockdowns wore on and people adjusted to spending more time at home, e-commerce has boomed and people have spent more time watching YouTube, helping the search giant business get going again. The U.S. economy also showed signs of recovery, notching record growth in the third quarter.
"Overall we're pleased with the degree to which advertisers have reactivated their budgets," Chief Financial Officer Ruth Porat said on a conference call. YouTube's focus on direct-response e-commerce ads has also helped boost revenue, she said.
The pickup in digital advertising also helped Facebook Inc., Snap Inc. and Pinterest Inc., all of which reported solid revenue growth in the quarter.