Google grows cloud sales as parent’s profits top $40bn

Google parent Alphabet reported a profit of $41.2bn for the full year 2020 as total sales of advertising soared.

The company’s total sales in 2020 reached $182.3bn after its fourth-quarter sales, at $57bn, were 23% higher than the same period in 2019. Advertising accounting for most of this ($168bn).

Alphabet’s Google cloud computing business made over $13bn in sales for the full year, compared to $8.9bn in 2019, but the division reported a loss of $5.6bn during the period – about $1bn more than the year before.

Ruth Porat, CFO at Google and Alphabet, said revenue growth was driven by Search and YouTube “as consumer and business activity recovered from earlier in the year”.

She said the company’s cloud business also saw sales growth, “significant ongoing momentum” and the company remains focused on “delivering value across the growth opportunities” it sees.

Google, like Amazon, is investing heavily in cloud computing services targeting the enterprise sector.

In its results, Amazon said its Amazon Web Services (AWS) cloud business added more revenue “quarter-over-quarter and year-over-year” than in any quarter in AWS’s history.

Cloud-based digital transformation within the enterprise market had benefited the company, it said.

AWS made sales of $12.7bn during the fourth quarter, which was 28% higher than the same period a year earlier.

Amazon also announced that AWS CEO Andy Jassy will take over as overall CEO as founder and current CEO Jeff Bezos moves to become executive chairman of the Amazon board.

Brian Klingbeil, chief strategy officer at IT service provider Ensono, said cloud computing is becoming more important to Google and Amazon. “Between Google reporting its cloud business earnings for the first time and AWS’s CEO taking over from Jeff Bezos, it is clear that cloud computing is becoming a larger focus for the big tech giants, signalling significant growth that is yet to come in the cloud industry,” he said.

“Google has been investing heavily to catch up with AWS and Azure, and the results released today reflect that.”

Recent enterprise wins for Google Cloud include Ford, announced it as its preferred cloud provider, as part of a wide-ranging, six-year technology collaboration. It joins a long list of enterprises including banking giants Deutsche Bank and Lloyds Bank, as well as challenger bank Atom.

And there is good reason for the likes of Google and Amazon to increase their focus on the cloud services market. Synergy Research Group said enterprise spending on cloud infrastructure services in the fourth quarter of 2020 was just over $37bn, some $4bn higher than the previous quarter and up 35% from the equivalent quarter in 2019.

“Notably, for the second successive quarter, the year-on-year growth rate increased, which is unusual for such a large, high-growth market,” it said. “It has taken just nine quarters for the market to double in size.”

Synergy Research said suppliers had their work cut out to eat into AWS’s dominant market position. “Microsoft, Google and Alibaba have all steadily gained market share over the last four years, but it has not been at the expense of market leader Amazon,” it said.