Source | IT Home, Extra Big Niu
Google Cloud (Google Cloud) is a division of Alphabet, Google's parent company, responsible for providing services such as cloud computing, data analysis, and machine learning. Google's cloud business, which has been loss-making since its launch in 2008, finally turned profitable for the first time in the first quarter of this year .
According to Alphabet's financial report, for the quarter ended March 31, Google's cloud business had revenue of US$7.4 billion, operating profit of US$191 million (approximately RMB 1.324 billion), and a profit rate of 2.5% . While this is a historic breakthrough, Google's cloud business still looks small compared to its competitors.
Amazon's AWS (Amazon Web Services) will have revenue of $80 billion in 2022, operating profit of $22.8 billion, and a profit margin of 28%. Microsoft's Azure is also growing, and while it hasn't released specific numbers, it's estimated to have more than twice the market share of Google's cloud business.
Why has Google's cloud business been losing money? The main reason is that it invested a lot of money to expand its infrastructure, develop new products, recruit new customers and talents. Over the past three years, Google's cloud business has lost $14.6 billion.
Alphabet CEO Sundar Pichai does not care about these losses. He believes that this is a necessary investment for future growth, and Google itself has enough profits to support these investments. He expressed satisfaction with the profit and said Google's cloud business has become one of the largest enterprise software companies in the world.
Whether Google's cloud business can narrow the gap with the leaders in the future depends on whether it can continue to maintain innovation and competitiveness. Currently, Google's cloud business is developing some new technologies, such as generative artificial intelligence (generative AI), to improve the quality and efficiency of its search services. Pichai said he doesn't think these technologies will add much to infrastructure costs and will give users more choice.
At the same time, Google Cloud business is also facing some challenges and pressures. The first is the change in the market environment. Due to factors such as the new crown epidemic and chip shortages, the demand and revenue of the entire industry have declined. Alphabet's total revenue for the quarter rose just 3%, to $69.8 billion. The second is the issue of cost control. Alphabet took a charge of US$2.6 billion this quarter, mainly including layoffs and cancellation of idle office space. These charges resulted in a decline in its operating income and profits, as well as margins. Finally, there is the issue of strategic adjustment. Ruth Porat, Alphabet’s chief financial officer, said that the company will be committed to achieving long-term growth and creating room for investment in the most promising areas by optimizing its cost structure. This means that Google's cloud business may face more internal competition and scrutiny, rather than unlimited support and support.
