Google Cloud posted an operating loss of $ 1.2 billion in the last quarter of 2020, 4% worse than the previous year, the technology giant said on Tuesday. The unit lost $ 5.6 billion for the full year, an increase of almost 21%.
The company’s overall business is doing very well, however, with a net profit of $ 15.2 billion – an increase of 43% over the same period last year – on revenues of nearly $ 57 billion, an increase 23% and more than analysts’ estimates.
Google (GOOGL) shares jumped more than 6% in after-hours trading.
While Google raises money from its core search advertising business, the company has been working for years to diversify its revenue through betting on hardware, cloud computing and several ambitious projects. The cloud, which proved to be a major profit generator for rival Amazon, was considered one of its most promising efforts.
Google’s cloud business is seeing sales grow rapidly, even as losses increase. The unit’s revenue reached US $ 13 billion last year, compared to almost US $ 9 billion the previous year.
Earlier this week, the company announced a six-year strategic partnership with Ford, part of which makes Google the automaker’s preferred supplier for cloud data storage.
“Obviously, we have been investing aggressively due to the substantial market opportunity we see,” said Google’s chief financial officer, Ruth Porat, in a earnings conference call on Tuesday, pointing to “the success that Google Cloud is having with large companies who are signing significant long-term commitment agreements. ”
The operating loss of the cloud business “reflects that we have significantly built our organization before revenue,” she added.
US tech giants further consolidated their dominance during the coronavirus pandemic, even as economies around the world suffered huge setbacks – Facebook’s $ 11.2 billion profit in the last quarter was more than 50% higher compared to the previous year; Microsoft (MSFT) recorded record revenues; and Amazon (AMZN) exceeded analysts’ profit expectations by more than $ 1 billion.
But many of these companies are under intense pressure from regulators that are likely to intensify further in 2021. Google, as Facebook (FB), is facing a major antitrust case, as well as questions about its role – particularly through the YouTube video platform – in disseminating incorrect information about the United States’ presidential election last year.
Google is also facing internal pressure, with hundreds of employees forming the company’s first union in early January.
And despite its increasing dominance, especially in areas such as online research and advertising, the company has pulled back from several high-profile projects in recent weeks.
On Monday, Google ended internal video game development efforts that were part of its gaming platform Stadia, a few days after parent company Alphabet announced it would end an initiative called Loon, which used giant balloons to transmit internet to people in remote areas around the world.
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