The cloud business of Google, to which it is currently providing a deeper look, does not seem to be doing well.
An operating loss of $1.2 billion for Google Cloud was reported by the company for the fourth quarter of 2020 which was 4 per cent worse compared to the same quarter a year ago. The results for the business for the while year was worse with a n increase in loss of almost 21 per cent at $5.6 billion loss for the full year.
This despite the overall business of the company doing well with a 43 per cent year on year growth in net profit for the fourth quarter at $15.2 billion against revenues of almost $57 billion which was a 23 per cent more than estimates of analysts.
Google has been trying hard to diversify its earnings through by diversifying into hardware, cloud computing and various ambitious moonshot projects while the company still generated most of its revenues from its core search advertising business.
The company believes that the most promising among the new ventures is its cloud business which has been a huge profit driver for cloud computing rival Amazon.
One of the peculiarities of Google’s cloud business is mounting losses in the face of fast sales growth. Compared to revenues generated by the business unit of almost $9 billion in 2019, the company generated revenues of $13 billion in 2020.
A six-year strategic partnership with Ford, which also includes Google being the preferred provider for cloud data storage for the United States based car maker, was announced by the Google earlier this week.
“We’ve obviously been investing aggressively given the substantial market opportunity we see,” Google’s chief financial officer, Ruth Porat, said on an earnings call while also pointing to “the success Google Cloud is having with large enterprises which are signing meaningful long-term commitment agreements.”
She added that the operating loss of the company’s cloud business “reflects that we have meaningfully built out our organization ahead of revenues”.
The Covid-19 pandemic period saw a significant increase in dominance of the US based tech companies including Google.
However, even though the search engine giant has exhibited increasing dominance over the market particularly in areas such as online search and advertising, it has also been forced to retreat in recent weeks from a number of high profile projects.
Its in-house video game development efforts were shut down on Monday by Google which was a part of its Stadia gaming platform. Just days earlier, Google’s parent company Alphabet announced its decision of winding down a project called Loon that was involved in using giant balloons for beaming internet to people residing in remote areas around the world.
(Adapted from CNN.com)