Google parent Alphabet last night reported a sharp drop in profit over the past quarter as it ramped up spending for a wide array of new gadgets and services. 

The company's profits dipped 23% from a year ago to $7.1 billion as revenue grew 20% to $40.5 billion for the California tech giant and internet search leader.

Digital advertising on Google continued to be the primary money-maker for Alphabet - accounting for some $34 billion in revenue. 

Industry tracker eMarketer forecast that Google will generate $105.33 billion in net digital ad revenue this year, taking a 32% share of the worldwide digital ad market.

Last night's earnings report showed that revenue from other sources including cloud computing climbed more than 40% to $6.4 billion. 

Alphabet has been pumping money into research and development for artificial intelligence, cloud infrastructure, and launching new Pixels smartphones and other hardware. 

"We continue to invest thoughtfully in talent and infrastructure to support our growth, particularly in newer areas like Cloud and machine learning," Alphabet's chief financial officer Ruth Porat said. 

The company, which faces competition reviews over its dominance of internet search on both sides of the Atlantic, has been seeking to diversify its business with more hardware and new services.

Losses on "other bets" such as self-driving cars and delivering internet services from high-altitude balloons swelled to $941m in the quarter, compared to a $727m loss the same time last year.

"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," commented Google chief Sundar Pichai. 

The results were impacted by a one-time charge of $549m linked to a tax settlement with French authorities, according to Porat.

Alphabet said it set aside nearly $1.6 billion as a provision for income taxes, up from $891m last year, and that its effective tax rate would be 18%, double that from a year earlier.