Dive Brief:
- Google Cloud revenue grew 32% year over year, to $7.3 billion, according to parent company Alphabet’s Q4 earnings reported Thursday.
- Operating income for Google Cloud was still in the red, with reported losses of $480 million in the period ending Dec. 31. But that’s a significant improvement over the $890 million in operating income losses Alphabet reported in the final three months of 2021.
- “We remain excited about the long-term market opportunity and the trajectory of the business,” Ruth Porat, Alphabet’s CFO, said during a Thursday earnings call. “Enterprises and governments are increasingly turning to us for their digital transformation initiatives across verticals and geographies.”
Dive Insight:
Cloud is a cost center rather than a net revenue generator for Alphabet, but it is inching toward profitability.
The third-largest U.S. hyperscaler, behind Amazon’s market-leading AWS and Microsoft’s cloud division, GCP has shown steady, incremental quarterly reductions in losses in the last year, even as revenue growth, which was 45% a year ago, has slowed.
“After a period of significant acceleration in digital spending during the pandemic, the macroeconomic climate has become more challenging,” Alphabet CEO Sundar Pichai said during the earnings call.
Porat attributed lower consumption to businesses focusing on optimization through cloud in response to economic challenges.
Nevertheless, cloud was a bright spot for the tech company, which just a few weeks ago announced plans to eliminate 12,000 jobs, highlighting a trend of workforce reductions in big tech.
“Cloud remains very focused on its path to profitability,” Pichai said.
With cloud still losing money, Alphabet moved to economize in other areas, announcing that it had extended the estimated useful life of servers and network equipment from four to six years, a cost-saving measure that parallels a July move by Microsoft.
“We expect these changes will favorably impact our 2023 operating results by approximately $3.4 billion for assets and service as of year-end 2022,” Porat said during the earnings call.
IBM made a similar announcement during its Q4 earnings call, a decision that is expected to yield $200 million in savings.
