Google-parent Alphabet Inc’s cloud business reported a slower growth of 22.5% in its third quarter revenue. Google Cloud also posted a net profit during the quarter, which was less than Wall Street estimates, raising concerns about the company’s position in the market.
However, the company said it is focusing more on making Artificial Intelligence (AI) more helpful for everyone and it will do everything needed to have the leading AI models.
“We’re continuing to focus on making AI more helpful for everyone; there’s exciting progress and lots more to come,” Alphabet Chief Executive Officer Sundar Pichai said in a statement.
Google’s cloud unit’s revenue growth slowed to 22.5% in the third quarter from 28% in the prior three-month period, registering its slowest growth since at least the first quarter of 2021. The unit’s third-quarter revenue rose to $8.41 billion. It posted an operating income of $266 million, compared with an operating loss of $440 million a year ago.
Read here: Alphabet Q3 result: Google Cloud miss overshadows tech giant’s earnings, share price down over 5%
Wall Street expected cloud computing revenue of $8.62 billion and operating income of $434 million.
Alphabet President and and Chief Investment Officer; CFO Ruth Porat said that the unit’s sales had been affected by some customers’ cost-cutting. He said that the third-quarter cloud growth is due to “customer optimization efforts,” without elaborating.
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Google Cloud includes infrastructure and platform services, collaboration tools, and other services for enterprise customers. Google Cloud generates revenues from fees received for Google Cloud Platform services, Google Workspace communication and collaboration tools, and other enterprise services.
“We’ll do everything that is needed to make sure we have the leading AI models and infrastructure in the world, bar none,” Pichai told investors on a call.
Porat and Pichai said that they would continue to find ways to operate more efficiently, with Porat noting that the company would maintain a “slower pace of headcount growth,” Bloomberg reported.
Also Read: Microsoft Q3 Results: AI bet pays big dividends. Here’s what the company says
The goal of those efforts is to free up as much room as possible to invest in opportunities such as artificial intelligence.
Overall, Alphabet reported a net profit of $19.69 billion for the July-September period, compared with $13.91 billion a year earlier. The company’s revenue for the quarter stood at $76.69 billion, compared with estimates of $75.97 billion.
The company recorded ad revenue rose to $59.65 billion in the third quarter from $54.48 billion a year earlier. Analysts on average had expected $59.12 billion in revenue from its advertising business.
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(With inputs from Agencies)
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Updated: 25 Oct 2023, 12:58 PM IST
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