Google’s cloud business lost $5.6B last year despite 50 percent revenue growth

The cloud computing industry saw a big boost in Q1 2020.

For a company as large and diverse as Google, the effects of the COVID-19 pandemic aren’t as devastating as they are for smaller businesses. In fact, certain areas of the company benefitted from increased demand for digital solutions.

One of those segments is Google Cloud. The search giant wants to compete with major players like Amazon’s AWS and Microsoft’s Azure. However, it has some work to do before it can reach that point.

For the first time, Alphabet (Google’s parent company) released specific numbers for Google Cloud. The segment incurred an astonishing $5.6 billion loss in 2020. That’s a testament to the amount of resources Google is pouring into the division.

Although a loss that large is noteworthy, Google Cloud’s growth is too. The segment saw a nearly 50 percent jump in revenue, bringing in a total of $13 billion, The Verge reports.

Growing Pains

It’s never easy to scale a business or make it profitable. However, the path to get there looks different for each company. For Google, it’s clear that scaling quickly is a top priority. The COVID-19 pandemic has sparked a digital revolution as companies, schools, and everyday people look for new ways to conduct their business online.

Cloud computing will continue to see massive growth in the next few years (and likely for the foreseeable future).

As The Verge points out, platforms like AWS and Azure had nearly a decade to grow and scale. Google is trying to play catch-up since it entered the game late. The answer, of course, is to throw money at the problem.

Thanks to the fact that its ads segment is enormous, Google can afford to do so. The company brought in $170 billion last year from ads alone.

The fact that Google can absorb a $5.6 billion loss from one division without blinking is incredible. However, that is likely what the next few years will look like for the Big Tech giant as it continues to scale its Cloud business.

That being said, a business that can compete with the likes of AWS and Azure can quickly recoup those losses. AWS earns Amazon more than $45 billion a year. Azure is worth around $61 billion for Microsoft.

Thanks to Google’s size and reputation, it could be a serious competitor (or leader) in the industry within a few years.

Cloud Transformation

It wouldn’t have been possible to keep the world running in 2020 without cloud computing. That opened countless eyes to the importance of the technology. It is now poised to have a massive impact on the future and will likely dictate how companies strategize their operations moving forward.

This is already beginning to occur. Take the resignation of Amazon CEO Jeff Bezos, for instance. He will be replaced later this year by Andy Jassy, a long-time AWS and cloud computing veteran. Microsoft made a similar move when current CEO Satya Nadella, the former head of Azure, took over for Steve Ballmer.

This trend is evident with a number of major tech companies and will become more common as priorities shift towards cloud computing.

In a conference call, Alphabet CEO Sundar Pichai said it best, “2020 was a year unlike any other. Last year also accelerated the shift to cloud and adoption of online television, with profound implications for all companies and consumers.”


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