Dive Brief:
- Google Cloud delivered its second-straight quarter of profits for parent company Alphabet, the tech company reported Tuesday in its Q2 2023 earnings.
- Google Cloud posted operating income of $395 million for three-month period ending June 30, a jump over its $590 million in losses it suffered in the second quarter of 2022. The cloud segment showed profitability for the first time ever in Q1 2023.
- Enterprise AI enthusiasm helped drive cloud segment revenue, which was up 28% year over year. “It is an exciting moment overall in cloud because there is definitely a lot of interest from customers on AI, and they definitely are engaging in many more conversations with us,” Alphabet and Google CEO Sundar Pichai said during the Tuesday earnings call.
Dive Insight:
Generative AI is reshaping the cloud business, as hyperscalers rush to reconfigure infrastructure to accommodate workloads and deliver new enterprise-grade capabilities.
“We are combining various engineering efforts across core infrastructure and cloud,” Pichai said, referring to progress in data center machine efficiency to support AI investments.
Cloud and AI are bound tightly together in Google Cloud’s business strategy.
“We are particularly excited about the customer interest in our AI-optimized infrastructure, our large language models, our AI platform services and our new generative AI offerings,” CFO Ruth Porat said.
For enterprises committed to controlling cloud cost, a balancing act is underway, as new generative AI tools, including Duet AI for Google Workspace, a cloud-based AI enhancement to the cloud platform’s enterprise productivity suite introduced in May.
“We continue to experience headwinds in the second quarter for moderation in consumption growth as customers optimize their spend,” said Porat, who will be stepping down from CFO to become president and chief investment officer once a replacement is found.
While the company experienced delays in data center construction projects during the first half of the year, Porat said buildout plans are underway.
“We do expect elevated levels of investment in our technical infrastructure, and that would be increasing through the back half of 2023,” said Porat.
“The primary driver of this, as you know well, is to support the opportunities we see in AI across the company, including the investments that we've already talked about, proprietary TPUs, all that we're doing with GPUs, as well as data center capacity,” Porat said.
