Google’s Q3 Cloud Revenue Falls Short, Raises Concerns Over AI Positioning
Google’s third-quarter earnings have exceeded consensus estimates, but its cloud revenue growth has fallen short, sparking concerns about its positioning in the field of artificial intelligence (AI). While Google’s earnings per share (EPS) rose by 46% to $1.55, its total revenue increased by 11% to $76.69 billion.
However, the tech giant’s cloud computing revenue only rose by 22% to $8.41 billion, missing estimates of $8.64 billion. This apparent loss of market share led to a drop in Google’s parent company, Alphabet’s, stock price.
According to KeyBanc Capital Markets analyst Justin Patterson, Google Cloud seems to have lost ground to Microsoft Azure in terms of market share. Microsoft’s cloud computing revenue rose by 24% to $31.8 billion in the same quarter.
Bank of America analyst Justin Post commented that while the cloud miss by Google raises concerns about its AI positioning, it is worth noting that the cloud accounted for just 2% of its gross profit. On the other hand, Amazon Web Services, owned by Amazon.com, remains the largest provider of cloud computing services.
In addition to cloud revenue, ad revenue played a significant role in Google’s Q3 earnings. Google’s ad revenue rose by 9% to $59.6 billion, while YouTube ad revenue increased by 12% to $7.95 billion.
While analysts have expressed concerns about Google’s cloud business, some have highlighted the potential of its AI traction among startups in the long run. However, it is clear that Google faces tough competition in the cloud computing industry.
In terms of market performance, Google’s stock, represented by GOOGL, fell by 6.2% to $130.18 in early trade.
Google’s Q3 earnings report reveals a mixed picture, as its cloud revenue falls short and raises concerns about its AI positioning. While the company’s total revenue and EPS have exceeded expectations, its cloud computing business appears to have lost market share to competitors like Microsoft Azure. The impact on Google’s stock price further emphasizes the significance of the cloud revenue miss. However, Google’s ad revenue, particularly from YouTube, has shown positive growth. The competition in the cloud computing industry remains fierce, with Amazon Web Services leadings the pack. Google’s AI traction among startups may be a potential strength for its cloud business in the long run. Overall, Google’s Q3 results indicate a need for continuous improvement and strengthening of its cloud offerings.