Google Cloud makes a profit for the first time
Google Cloud may be chasing Amazon and Microsoft in the cloud game, but it has something big to brag about after earnings were released today. The company made a profit in its cloud unit for the first time since it began reporting cloud revenue several years ago.
The company reported cloud revenue of $7.4 billion in the first quarter of 2023, an increase from $5.8 billion on the same period a year earlier, an increase of 27.5%. But that growth is not the main news here. The company also reported a loss in operating income of $706 million a year ago. This year it reported a profit of $191 million. That’s huge for a company that has struggled to rank third in the cloud market.
However, while Google Cloud revenue grew 27.5% this quarter, that growth is slowing from 32% last quarter and 38% last quarter. Cloud spending in general has slowed as companies take a closer look at their cloud spending and cut where they can.
Ray Wang, founder and principal analyst at Constellation Research, says it shows how long it takes to get to this point in this market. “This is a significant milestone for Google Cloud, which started in April 2008. Fifteen years later, it is now profitable. This shows how difficult it is for new players to enter the space and what is required to achieve escape velocity for cloud adoption,” Wang told TechCrunch.
Insider Intelligence senior analyst Max Willens says slowing growth is tempering the profitability news. “It’s remarkable that the cloud segment is making a profit, and it’s a testament to management’s diligence in steering cloud toward profitability. But the reality is that Google Cloud remains comfortably behind its two largest competitors and its growth is slowing,” he said.
It’s worth noting that Google Cloud includes both infrastructure and platform as service pieces, which compete directly with Amazon Web Services and Microsoft Azure, along with Google Workspace, its suite of productivity software that includes corporate GMail, Docs, Calendar, etc
So that combined revenue means it’s not exactly an apples-to-apples comparison to its competitors, but it’s still significant, especially when you consider that the company reported losing a whopping $5.6 billion on cloud drive in 2020. That’s a big change. in just three years.
Even as it reports this positive quarter, the company laid off 12,000 people in January. He also reported that he was buying back $70 billion worth of stock. Meanwhile, CNBC reported that Alphabet CEO Sundar Pichai earned $226 million in total compensation last year.