Alphabet said Tuesday that Google’s cloud business is
profitable for the first time in the three years it’s been reporting operating
metrics for the division.
The segment generated $191 million in operating income on
$7.45 billion in revenue in the first quarter, according to Alphabet’s earnings
statement. In the year-ago quarter, the unit reported a $706 million loss on
$5.82 billion in revenue.
The cloud business includes the Google Cloud Platform, which
rents out cloud infrastructure and services that companies can use to build and
run their own applications, as well as Google Workspace productivity software
subscriptions. Together, the business now accounts for 10% of Alphabet’s total
revenue. Cloud customers include Deutsche Bank, Major League Baseball, PayPal and
UPS.
Google has been vying to win business from big corporations
and government agencies that are deciding between major tech vendors as they
move from traditional data centers to the cloud and rely on more compute-heavy
applications involving artificial intelligence. Amazon Web Services, the leader
in cloud infrastructure, popularized the market in the mid-2000s and has been
profitable every quarter since 2014. Microsoft, the second-biggest player in
the space, doesn’t report profitability figures for its Azure unit.
Alphabet started disclosing cloud revenue in 2020, and the
following year began providing information on the scale of its operating
losses.
Last week Alphabet restated operating income for cloud and
its other segments, resulting in lower cloud losses in 2021 and 2022. The
restated numbers show the cloud unit had a $186 million operating loss in the
fourth quarter, compared with $480 million before the change, for example.
“Certain costs associated with corporate initiatives
supporting consumer-facing activities, previously reflected in unallocated
corporate costs, are now allocated to Google Services; and centrally-managed
shared research and development activities, including our shared developer
tools, are now allocated based on an updated measure of the relative benefit
derived from the services,” Alphabet said in a filing.
“As a result of these changes, more of the previously
unallocated corporate costs are allocated to our segments, and more of certain
previously allocated costs are allocated to our consumer-facing Google Services
products and less to Google Cloud enterprise products.”