Alphabet's (GOOG, GOOGL) stock surged 6% in morning trading Wednesday after the Google parent reported fiscal third quarter earnings that beat analysts' estimates on the top and bottom lines, helped by strong growth in its cloud business.

The search giant reported earnings per share of $2.12 on revenue of $88.27 billion for the quarter ended Sept. 30. That represents a profit and sales increase from the same period last year of 37% and 15%, respectively.

Analysts were anticipating earnings per share of $1.83 on revenue of $86.44 billion, according to data compiled by Bloomberg.

Advertising revenue topped $65.85 billion versus analysts' expectations of $65.5 billion, up from the year-ago period's $59.65 billion.

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

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

The run-up in cloud revenue 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 roughly $13 billion on capital expenditures for the current quarter, CFO Anat Ashkenazi said on the call. And the company anticipates another increase in AI and data infrastructure spending in 2025.

Google also faces competition on its home turf with the introduction of increasingly sophisticated AI-powered chatbots. On Monday, the Information reported that Meta (META) is developing its own search engine to drive its Meta AI chatbot, providing users with conversational answers to their questions and prompts.

How the next generation of answer engines compete with Google's traditional and AI-boosted search remains a key question for the company.

Pichai framed the expansion of AI tools as boosting the user experience for search. AI Overviews, Google's search feature that offers concise answers to user queries, now reaches 1 billion users on a monthly basis, the company announced Monday.

“People are asking longer and more complex questions and exploring a wider range of websites," Pichai said. "What's particularly exciting is that this growth actually increases over time as people learn that Google can answer more of their questions."

Similar to legacy search results, users are shown advertisements that Google places alongside AI Overviews.