Google, Microsoft report rapid growth in cloud revenues due to pandemic

GCP revenues rise 44 per cent with Azure up 50 per cent compared with last year

Google's parent company Alphabet on Tuesday announced its earnings report for the first quarter of 2021, posting strong revenue growth for its cloud computing unit.

According to Alphabet [pdf], its cloud computing business, which includes both Google Cloud Platform (GCP) and Workspace (formerly G Suite), reported $4.05 billion in revenue for the first quarter of the year, up 46 per cent from $2.78 billion a year earlier.

"GCP revenue growth rate once against was meaningfully above cloud overall," said Sundar Pichai, CEO of Alphabet, during a conference call.

"Customers continue to unlock the value of the Google ecosystem by signing multi-year, multi-product partnerships with companies like Global Payments and Grupo Global," he added.

Google Cloud's operating cost during Q1 was $974 million, compared with a $1.73 billion loss a year earlier.

While Google Cloud's growth should help improve the company's operating results, Alphabet CFO Ruth Porat said during the conference calls that Google will continue to "invest to build the cloud organisation for long-term performance."

Overall, Alphabet's net income during the first quarter increased 162 per cent year over year, to $17.93 billion.

Diluted earnings per share were $26.29, while total revenues hit $55.3 billion, up 34 per cent from its $41.2 billion in revenue for Q1 2020.

As usual, Google Services accounted for most of the sales in Q1, with $51.18 billion in revenue. Advertising revenue generated $44.68 billion in revenue, compared to $33.76 billion a year earlier.

Alphabet last month said that it planned to invest more than $7 billion in US offices and data centres and create about 10,000 new jobs across 19 states in 2021. The company also announced on Tuesday a large buyback programme, saying it would repurchase up to an additional $50 billion of its Class C capital stock.

On Tuesday, Microsoft also announced its earnings results, posting $17.7 billion in commercial cloud revenue in fiscal Q3, up 33 per cent from a year earlier.

The Intelligent Cloud business, which includes Azure and server products, contributed $15.1 billion this quarter, while Productivity and Business Processes posted $13.6 billion.

According to industry experts, Microsoft is benefitting from an increase in demand for its cloud-based services due to pandemic-induced remote working. Azure revenue was up 50 per cent year-over-year, while LinkedIn posted 25 per cent growth in revenue.

"Over a year into the pandemic, digital adoption curves aren't slowing down. They're accelerating, and it's just the beginning," said Satya Nadella, CEO of Microsoft.

"We are building the cloud for the next decade, expanding our addressable market and innovating across every layer of the tech stack to help our customers be resilient and transform."

Amy Hood, executive vice president and chief financial officer of Microsoft, said: "The Microsoft Cloud, with its end-to-end solutions, continues to provide compelling value to our customers generating $17.7 billion in commercial cloud revenue, up 33 per cent year over year."

Overall, the software giant reported third quarter net income of $15.5 billion (up 44 per cent), on revenue of $41.7 billion. Total revenue was up 19 per cent from a year ago.