Yesterday, Alphabet, Google’s parent company, reported its second quarter 2023 financial earnings. Alphabet reported revenue of $74.6B, up 7% YoY, net income of $18.37B, up from $16B YoY. For Google Cloud, the Q2 revenue was $8 billion, up 28%, and operating profit was $395 million. Google Cloud has now posted profit for two quarters in a row.

During the earnings call, Alphabet CEO Sundar Pichai provided several updates on the Google Cloud business.

He revealed that more than 70% of Gen AI unicorns are Google Cloud customers, including Cohere, Jasper, Typeface, and many more. Also, Google highlighted that customers are able to achieve nearly two times better price performance than industry alternatives since it offers the widest choice of AI supercomputer options with Google TPUs and advanced Nvidia GPUs, and recently launched new A3 AI supercomputers powered by Nvidia’s H100.

In the last quarter, Google saw a strong demand for the more than 80 models – including third party and popular open source – in Vertex, Search, and Conversational AI platforms, with the number of customers growing more than 15X from April to June.

Sundar also mentioned the world’s largest consulting firms, like Accenture and Deloitte, have collectively committed to train more than 150,000 people on Google Cloud generative AI.

Google Cloud business highlights:

  • GCP revenue growth remained strong across geographies, industries and products. That being said, we saw a continued moderation in the rate of consumption growth as consumers optimized their spend.
  • Google Workspace strong revenue growth was driven by increases in both seats and average revenue per seat.
  • Google Cloud had Operating Income of $395 million and the operating margin was 5%.

“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 such as Duet AI for Google Workspace, although we are still clearly in the early days,” said Ruth Porat, CFO Alphabet and Google. “At the same time, we continued to experience headwinds in the second quarter from moderation in consumption growth as customers optimized their spend. We continue to invest aggressively, while remaining focused on profitable growth,” she added.

Google Cloud revenue has been growing steadily over the past few years. In 2022, Google Cloud revenue was $55.33 billion, up from $45.36 billion in 2021. This represents a growth rate of 22.2%.

The following is a table of Google Cloud revenue from 2017 to 2022:

YearRevenue (in billions of USD)
201718.9
201825.7
201930.7
202038.0
202145.36
202255.33

Summary and Analysis

In Q2 2023, Google Cloud showcased robust financial performance with a 28% YoY revenue growth, reaching $8 billion, and an operating profit of $395 million. This marks the second consecutive quarter of profitability for Google Cloud. The division has successfully attracted over 70% of Gen AI unicorns as clients and offers competitive AI supercomputing options, including Google TPUs and Nvidia’s H100-powered A3 AI supercomputers. This positions Google Cloud as a strong contender in the AI-driven cloud market, especially with its 15X customer growth in Vertex, Search, and Conversational AI platforms from April to June.

Competitively, Google Cloud holds a 10% global market share, trailing behind AWS’s 33% and Azure’s 22%. While AWS remains the market leader with a broad range of offerings and established scale, Azure leverages Microsoft’s enterprise relationships and offers a comprehensive portfolio of cloud solutions. Google Cloud differentiates itself through specialized data analytics and AI solutions, boasting nearly two times better price performance than industry alternatives. Its recent profitability and strong growth in AI services indicate a promising trajectory, albeit with ground to cover in market share.