Alphabet CEO Sundar Pichai has committed to continue investing in its cloud arm, as the firm’s fourth-quarter results confirmed Google Cloud’s revenue increased by 30% to $12bn in the three months to 31 December 2024.
The year-on-year uptick in Google Cloud’s quarterly revenue was “led by growth” in the company’s core cloud infrastructure offerings, as well as growing demand for its artificial intelligence (AI) infrastructure and generative AI (GenAI) propositions, said Alphabet in its financial statement.
The company previously forecast that it would end 2024 with its combined Cloud and YouTube divisions on an annual revenue run rate of more than $100bn, but the performance of both has exceeded expectations, said Pichai.
“Our AI-powered Google Cloud portfolio is seeing stronger customer demand, and YouTube continues to be the leader in streaming watch-time and podcasts,” said Pichai, in a statement.
“Together, [Google] Cloud and YouTube exited 2024 at an annual revenue run rate of $110bn … we are confident of the opportunities ahead, and to accelerate our progress, we expect to invest approximately $75bn in capital expenditure in 2025.”
On a conference call, to discuss the company’s financial results in more detail, Pichai said the company was rolling out products to the market “faster than ever before”, which is reflected in the growing product usage and revenue it is seeing.
“Our sophisticated global network of cloud regions and datacentres provides a powerful foundation for us and our customers, directly driving revenue,” he said, in comments transcribed by Seeking Alpha.
“We have a unique advantage, because we develop every component of our technology stack, including hardware, compilers, models and products. This approach allows us to drive efficiencies at every level, from training and serving, to developer productivity.”
The knock-on effect of this is that the company was able to build 11 new cloud regions and datacentre campuses in the US and the rest of the world in 2024, while making incremental improvements in the performance of the hardware that sits within these facilities during this time period.
“Google datacentres deliver nearly [four times] more computing power per unit of electricity compared to just five years ago. These efficiencies, coupled with the scalability, cost and performance we offer, are why organisations increasingly choose Google Cloud’s platform,” Pichai continued.
“In fact, today, cloud customers consume more than [eight times] the compute capacity for training and inferencing compared to 18 months ago. We’ll continue to invest in our cloud business to ensure we can address the increase in customer demand.”
On that point, Pichai said the number of “first-time commitments” it received from new Google Cloud customers in 2024 was more than double the number it got in 2023.
“We also deepened [our existing] customer relationships,” he added. “Last year, we closed several strategic deals over $1bn, and the number of deals over $250m doubled from the prior year.”
Lee Sustar, principal analyst at IT market watcher Forrester, said the way Pichai flagged the performance of Google Cloud and YouTube in its results suggests he is trying to signal to the market and investors that Alphabet’s fortunes are not solely dependent on the company’s search advertising business.
“If Google Cloud were a separate company, its AI-driven earnings growth would simply please investors and confirm to customers that the company is a long-term and innovative player for the enterprise IT market,” said Sustar.
“However, Google Cloud is part of a complex feedback loop to the rest of the Alphabet portfolio that also requires big investments in AI, such as the ad-driven Search business and YouTube.
“That’s apparently why Alphabet CEO Sundar Pichai packaged Cloud and YouTube as a combined success story, citing an annual run rate of $110bn – a message to investors that Alphabet is less dependent on search advertising than in the past.
“Enterprise business customers looking for long-term bets on AI cloud services will have to take a closer look and assess the investment plans for Google Cloud and is competitors,” added Sustar.
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