Google Cloud, the cloud services division of Alphabet, reported significant revenue growth, reaching $11.4 billion in the third quarter of 2024, representing a 35% increase compared to the same period last year. This expansion, supported by the growing adoption of generative artificial intelligence (GenAI) among its customers, has also led to an increase in the company’s operating margin, which now stands at 17%.
Google Cloud’s operating profit increased sevenfold, reaching $1.9 billion compared to $266 million the previous year. Sundar Pichai, CEO of Alphabet, noted that the opportunities for the cloud business “are increasing as customers adopt generative AI.”
Capex and the Future of Data Centers
Alphabet’s capital expenditure (CapexCAPEX, short for Capital Expenditure (capital expenditures…) remains high, reaching $13 billion in the third quarter, up from $8.1 billion in the same period in 2023. According to Alphabet’s CFO, Anat Ashkenazi, approximately 60% of this spending was directed toward servers, while the remaining 40% was for data centers and networks. Ashkenazi indicated that while spending for the fourth quarter will be similar, an additional increase is anticipated in 2025, although not with the same percentage increase seen between 2023 and 2024.
In the third quarter, Google committed to investing over $7 billion in data centers, of which $6 billion is allocated for the United States. The company aims to optimize its physical infrastructure and improve the efficiency of its operations through AI, a strategy that Ashkenazi stated will “enhance the efficiencies of our technical infrastructure and streamline operations.”
Operational Efficiency and Possible Workforce Changes
Pichai and Ashkenazi also highlighted the company’s efforts to improve its operational efficiency, including optimizing its workforce. However, they did not specify whether this would involve growth or further staff cuts, leaving open the possibility of future adjustments to its employee structure.
Rivalry in the Cloud Sector
Google’s financial report comes a day after Microsoft accused the company of leading “shadow campaigns” to discredit its competitor with regulatory authorities and the public. According to Microsoft, Google is trying to “discredit Microsoft with competition authorities and mislead the public.” Google responded to these accusations by claiming that its concerns about Microsoft’s cloud licensing practices have been “very public,” arguing that these anti-competitive practices by Microsoft limit customer options and negatively impact cybersecurityCybersecurity solutions are essential in the digital ag… and innovation.
Microsoft and Amazon Web Services, Google’s main competitors in the cloud sector, are also scheduled to release their financial results this week.
via: DCD