Google commits to cloud and AI

Alphabet has reported revenue of $68bn for its third quarter of 2022, a 6% increase over last year. The company’s results were impacted by fluctuating currencies, and Alphabet said it would be working to realign resources to fuel its highest growth priorities.

Google Cloud Platform reported revenue growth of $6.9bn. “The long-term trends that are driving cloud adoption continue to play an even stronger role during uncertain macroeconomic times,” said CEO Sundar Pichai in the transcript of the earnings call posted on Seeking Alpha. “Google Cloud helps customers to solve today’s business challenges, improve productivity, reduce costs and unlock new growth engines.”

Discussing the next phase of Google innovation, Pichai said: “Throughout Google’s history, periods of dedicated focus have enabled us to emerge strongly and unleash new eras of computing innovation. For example, over a decade ago, focusing the company’s efforts on mobile helped us to build and grow our business for the shift to mobile computing. We are at a similar point now with AI [artificial intelligence], another transformational technology.”

Pichai claimed that the investments in AI and deep computer science put Google in a position where it is able to deliver a wide range of breakthroughs across its products and services to help people, businesses and communities.

“Through advanced language models, AI is unlocking new experiences that support more natural and conversational ways to interact with computing,” said Pichai, describing Google’s LaMDA as “one of the most promising models” for conversational AI. 

During the quarter, said Pichai, DeepMind debuted Sparrow, its “most helpful and safest” language model yet. Sparrow can talk to users, answer questions and provide evidence-based answers using Google Search, he said.

During the earnings call, CFO Ruth Porat discussed growing the Google Cloud business. “Our total cost of revenues was $31.2bn, up 13%, primarily driven by other cost of revenues, which was $19.3bn, up 20%,” she said. “The biggest factor here was costs associated with datacentres and other operations, followed by hardware costs.”

This continued cost associated with expanding datacentre capacity has been instrumental in making Google, along with fellow US providers Microsoft and Amazon, leaders in the European cloud market.

At the end of September, Synergy Research Group reported that the European cloud market is now more than five times as big as it was in early 2017, reaching $10.9bn in the second quarter of 2022.

Over that same period, European service providers have grown their cloud revenues by 167%, but their market share has declined from 27% to 13% as their growth rate lagged well behind the overall cloud market growth.

Synergy noted that the main beneficiaries of the market growth have been Amazon, Microsoft and Google. These three leading global cloud providers now account for 72% of the regional market and their share continues to rise steadily.