Google parent Alphabet Inc on Monday reported its highest-ever quarterly expenses, though revenue growth topped expectations.

The company has increased spending in recent years on areas including cloud computing and consumer electronics that it views as essential to maintaining its industry leadership in the face of stiff competition from Amazon.com and Microsoft.

Alphabet, which generates about 85 percent of its revenue from sales of ad space and ad technology, reported total third-quarter revenue of $40.5 billion. That was up 20% over last year and compared with 19% growth in the second quarter.

Google’s Other Revenue, which includes cloud and consumer hardware, was $6.4 billion.

Google’s ad revenue rose 17% to $33.9 billion, suggesting demand for the company’s search, video and web display ads remains strong.

Net income was $7.1 billion, down from $9.2 billion in the same period a year earlier.

Total expenses in the third quarter reached $31.3 billion, about 25% higher than a year ago and topping the previous high of $31.1 billion in the 2018 fourth quarter.

The operating margin was 23%, down from 24% in the second quarter.

“I am extremely pleased with the progress we made across the board in the third quarter, from our recent advancements in search and quantum computing to our strong revenue growth driven by mobile search, YouTube and Cloud,” said Sundar Pichai, Chief Executive Officer of Google. “We’re focused on providing the most helpful services to our users and partners, and we see many opportunities ahead.”

“Our businesses delivered another quarter of strong performance, with revenues of $40.5 billion, up 20% versus the third quarter of 2018 and up 22% on a constant currency basis,” said Ruth Porat, Chief Financial Officer of Alphabet and Google. “We continue to invest thoughtfully in talent and infrastructure to support our growth, particularly in newer areas like Cloud and machine learning.”