Dive Brief:
- Google Cloud revenue soared during the first three months of the year, driven by growing demand for AI capabilities, Google and Alphabet CEO Sundar Pichai said Thursday during the company’s Q1 2024 earnings call.
- “On the Cloud side, obviously, it's definitely a point of inflection,” Pichai said. “The AI transformation is making everyone think about their whole stack.”
- The tech giant reported $9.6 billion in cloud segment revenue on the quarter, a 28% increase year over year. Pichai said he expects YouTube and Cloud to end 2024 at a combined annual run rate of over $100 billion.
Dive Insight:
The LLM boom opened a new front in the battle for cloud business last year, giving enterprises an additional migration incentive, as hyperscalers raced to deploy generative AI capabilities.
Google brought its Gemini 1.5 Pro model into public preview earlier this month and released the Gemma family of open-weight models in February. The company also embedded a prior version of Gemini throughout its Workspace productivity suite in February.
“In Cloud, we have announced more than 1,000 new products and features over the past eight months,” Pichai said, pointing to the company’s AI-infused enterprise services and training-grade chip technologies.
Not all AI activity originates in cloud but much of it flows through hyperscaler infrastructure, from compute-hungry model training to daily inferencing calls.
“More than 60% of funded gen AI startups and nearly 90% of gen AI unicorns are Google Cloud customers,” according to Pichai.
The infrastructure needed to support model training and enterprise use cases ignited a cloud data center building boom that continues to reverberate through the industry.
Google Cloud remains heavily invested and is restructuring accordingly, Pichai said.
“In addition to bringing together our model building teams under Google DeepMind, we recently unified our ML infrastructure and ML developer teams to enable faster decisions, smarter compute allocation and a better customer experience,” Pichai said.
The commitment is reflected in capital expenditures, which were $12 billion during the three-month period ending March 31, according to President, Chief Investment Officer and CFO Ruth Porat.
“We are continuing to invest in top engineering and technical talent, particularly in cloud, Google DeepMind and technical infrastructure,” Porat said.
The company expects quarterly capital expenditures to remain at the $12 billion level throughout the year, driven primarily by server component and data center investments, according to Porat.
“We're very committed to making the investments required to keep us at the leading edge in technical infrastructure to support the growth in cloud,” Porat said.
