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Alphabet Earnings: Google Cloud Revenue Up 45 Percent To $4.99B

‘In GCP our customer wins...reflect our multi-year investments in products and solutions that are purpose-built to solve for the biggest opportunities within our targeted eight industries,’ says Ruth Porat, chief financial officer for Google and parent company Alphabet.

Google Cloud revenue jumped 45 percent to $4.99 billion in the third quarter compared to the same period last year, reflecting significant growth in infrastructure and platform services along with Google Workspace.

The results slightly missed analysts’ consensus expectations for $5.04 billion in revenue for Google Cloud, which is generated primarily from fees received for Google Cloud Platform (GCP) and Google Workspace’s collaboration and productivity apps.

Revenue growth for GCP — the industry’s third largest cloud computing provider behind No. 1 Amazon Web Services and No. 2 Microsoft Azure – topped the overall performance of Google Cloud.

“In GCP our customer wins...reflect our multi-year investments in products and solutions that are purpose-built to solve for the biggest opportunities within our targeted eight industries,” Ruth Porat, chief financial officer for Google and parent company Alphabet, said during the Mountain View, Calif.-based company’s earnings call today with financial analysts. “The benefit of these solutions to our customers is clear, and they are choosing to work with us as their long-term transformation partner.”

Part of Google Cloud’s strength is its open, scalable and flexible approach, Alphabet and Google CEO Sundar Pichai said. Supporting customers both from multi-cloud and hybrid cloud perspectives allows them to run workloads anywhere — on Google Cloud Platform, at the edge or in their data centers, he said.

“We don‘t view it as a one-size-fits-all,” Pichai said. “We want to meet the customers the way they want to take this journey. We want to be customer-centric here and…go where the market goes.”

Pichai outlined several areas that he said are driving bigger deals for partners. Data, analytics and artificial intelligence (AI) continue to be a “foundational shift for what companies are trying to accomplish,” and BigQuery — Google Cloud‘s fully managed, analytics data warehouse – stands out, according to Pichai.

“We are definitely seeing continued momentum there — it’s a source of strength,” he said. “Security continues to be an increasing area of focus and a differentiator for us given over two decades of investment we have had. We pioneered zero trust. Multi-cloud continues to be a differentiator. I do think customers are increasingly looking for it, and we’ve embraced it from early on. But, above all, we are very, very focused on industry value propositions – really sharpening our solutions by verticals. That’s really helped us get some of the bigger deals...and we’ll continue doing that.”

Google Cloud’s third-quarter results equate to an annualized revenue run rate of $19.96 billion, up from $18.5 billion based on this year’s second-quarter performance and $13.78 billion based on the third quarter of last year.

The cloud provider continued to chip away at its operating loss, which narrowed to $644 million in the third quarter, from $591 million in the second quarter and $1.21 billion in the third quarter of 2020.

Overall Alphabet Results

Alphabet’s overall third-quarter revenue and earnings easily beat analysts’ consensus estimates on broad-based strength in advertiser spending and elevated consumer online activity as well as the strong contribution from Google Cloud.

Alphabet reported its overall revenue rose 41 percent to $65.12 billion, compared to $46.17 billion in the same period last year. Net income reached $18.94 billion, or $27.99 in earnings per share (EPS), from $11.25 billion, or $16.40 EPS, in last year’s third quarter.

Analysts had expected revenue of $63.34 billion and EPS of $24.08.

Pichai laid out Google’s vision to become an AI-first company in 2016, and the company’s third-quarter results five years later reflect how its investments in AI are building more helpful products, he said.

“AI and ML itself is the broader, deeper investments we are driving, and we‘re using it to across our product portfolio,” Pichai said. “The recent launch of Tensor and Pixel 6 (smartphone) is a great example of that. We are willing to go as deep in the stack as needed. Silicon both on the cloud side with our Tensor Processing Units and Google Tensor on the client side is an example of that.”

Google Tensor is the first system on a chip (SoC) made by Google, which last week described it as a milestone for machine learning.

Shares of Alphabet, which closed at $2,786.17 per share today, rose $37.23 or 1.35 percent by the end of the trading day Tuesday. The stock price decreased .92 percent to $2,760.46 in after-hours trading as of 8:25 p.m. ET.

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