Google’s cloud business is profitable for the first time

Google poured money into its cloud business to compete with Amazon And Microsoft. Those huge investments pay off in the end.

Alphabet said on Tuesday that Google’s cloud business was profitable for the first time in three years of reporting performance metrics to the division.

According to Alphabet’s earnings report, the segment generated $191 million in operating income on revenue of $7.45 billion in the first quarter. For the previous quarter, the unit reported a loss of $706 million on revenue of $5.82 billion.

The cloud business includes the Google Cloud Platform, infrastructure leasing and cloud services that companies can use to build and run their own applications, as well as subscriptions to productivity software Google Workspace. Cloud customers include Deutsche Bankprofessional baseball league, PayPal And ups.

Google has been competing for business from large corporations and government agencies that are having to choose between major technology providers as they move from traditional data centers to the cloud and rely on more computationally intensive applications involving artificial intelligence. Amazon Web Services, the leader in cloud infrastructure, popularized the market in the mid-2000s and has been profitable quarterly since 2014. Microsoft, the second largest player in the field, is not reports profitability metrics for its Azure unit.

Alphabet began disclosing its cloud revenue in 2020, and the following year began providing information on the size of its operating loss.

Last week, Alphabet restated operating income for the cloud and other segments, resulting in lower cloud losses in 2021 and 2022. The restated numbers show the cloud unit. Cloud posted an operating loss of $186 million in the fourth quarter, compared with $480 million before the change, for example.

“Some costs associated with corporate initiatives supporting consumer-facing activities, previously reflected in unallocated corporate costs, are now allocated to Google Services; and centrally managed research and development activities, including our shared developer tools, are now allocated based on an update of the relative benefit measure services,” Alphabet said in a profile.

“As a result of these changes, many previously unallocated business costs are allocated to our segments, and certain previously allocated costs are allocated to Google Services consumer products. for our consumption and less for Google Cloud products for business.”

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