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Google Cloud growth slows, losses grow, bosses unworried

Server spend surges across Alphabet’s empire

Google’s cloud continues to lose money, but the ad giant and its parent company Alphabet aren’t troubled by the $858 million in cloudy red ink produced in its second quarter for financial year 2022.

Alphabet reported overall Q2 [PDF] revenue of $69.7 billion, $40 billion of which came from Google Search and related activities, while YouTube ads generated $7.4 billion and Google’s advertising network contributed $8.3 billion.

Google Cloud brought in $6.3 billion of revenue, a 35 percent year on year increase compared to Q2 2021’s $4.6 billion revenue. But the $858 million loss was 45 percent higher than the $591 million deficit recorded last year.

Revenue growth was also slower than the 44 per cent jump from Q1 2021’s $4 billion to Q1 2022’s $5.8 billion.

Alphabet execs were untroubled by the state of the G-Cloud.

Speaking in the company’s earnings webcast, CEO Sundar Pichai said he believes Google Cloud has a “substantial market opportunity here” because the market “still feels like early stages of this transformation.

“We are constantly in conversations with customers, big and small, who are just undertaking the journey.”

Some customers have found it hard to spend on cloudy projects, others are “thinking about the term for which they're booking and so on.”

Alphabet CFO Ruth Porat weighed in, too, stating that the company is “investing to support the long-term growth and given the upside that we see … looking at the path to profitability.”

Neither Porat or Pichai offered a timeframe for Google’s cloud producing a profit.

Pichai suggested that Google’s ongoing investment in AI may help, by allowing the creation of differentiated products.

While the G-Cloud is still making losses, the rest of the Alphabet empire is in rude health.

Revenue rose by 13 percent year on year, and operating margin popped by 28 points. Net income of $16 billion was, however, lower than the $18.5 billion recorded in Q2 2021 when revenue was a mere $62.3 billion.

Google attributed that dip, in part, to spending on data centers that was hard to undertake in previous quarters thanks to COVID-related complications.

New servers dominated the growing infrastructure spend and execs said investors should prepare for ongoing high levels of “investments in technical infrastructure.”

Spend on office facilities will also increase, but hiring will dip.

Pichai said Alphabet will continue to hire “top engineering and technical talent”, and will invest in tools to make those folks more productive. ®

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