Google Cloud bested Wall Street expectations by generating over $9.1 billion in revenueduring its fourth quarter 2023 as the cloud giant reported its most profitable quarter in company history.
Mountain View, Calif.-based Google Cloud accounted for nearly 11 percent of parent company Google’s total revenue of $86 billion in Q4 2023.
Artificial intelligence was top of mind for Google CEO Sundar Pichai and his leadership team during Google’s Q4 2023 earnings call this week with a particular focus on highlighting momentum around Gemini, Duet AI and Vertex AI.
“Using Vertex AI, Samsung recently announced its Galaxy S24 Series smartphone with Gemini and Imagen 2, our advanced text-to-image model,” said Pichai. “Victoria Secret & Company will look to personalize and improve the customer experience with Gemini, Vertex AI search and conversations. … In Workspace, Duet AI is helping employees benefit from improved productivity and creativity with thousands of paying customers around the world, including Singapore Post, Uber and Woolworths.”
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Overall, 2023 was a year of “profound innovation and product momentum,” said Pichai. “I’m excited for what’s ahead in 2024.”
CRN takes a look at the five most important takeaways from Google Cloud’s Q4 2023 financial earnings results this week including sales growth, profitability, and everything AI and generative AI.
No. 1: Google Cloud Records Record Profitability
Mountain View, Calif.-based Google Cloud reported $864 million in operating income for fourth quarter 2023, representing the most profitable quarter in the cloud company’s history.
Google Cloud’s operating income of $864 million in Q4 2023 is up significantly from an operating loss of $186 million during the same quarter one year ago.
This means Google Cloud improved its operating income by over $1 billion from Q4 2022 to Q4 2023, which is a significant accomplishment.
For years, Google Cloud was in the red due to the company investing billions each quarter to expand its global cloud infrastructure and services reach. That changed in 2023 when Google Cloud reported a profit for the first time in its history in Q1 2023 by generating $191 million in operation income.
For the entire 2023, Google Cloud achieved a 5.2 percent operating margin which marks the company’s first year with a positive operating margin. For example, in 2022, Google recorded a 7.2 percent operating margin loss. In 2020, Google Cloud reported a 42.9 percent operating margin loss during the year.
“Our infrastructure is key to realizing our big AI ambitions. It’s a major differentiator for us,” said Pichai. “We continue to invest responsibly in our data centers and compute to support this new wave of growth in AI-powered services for us and for our customers. Through this, we are being disciplined in how we run the company.”
With four straight quarters of positive operating income, Google Cloud has positioned itself to never be in the red again.
Gemini Is ‘Only Going To Get Better’; Gemini Ultra ‘Coming Soon’
Google’s new large AI model Gemini was front and center in the discussion during the company’s earnings call this week, unveiling that Gemini will be included in Google’s core products.
“[Gemini] can run on everything from mobile devices to data centers,” said CEO Sundar Pichai. “Gemini gives us a great foundation. It’s already demonstrating state of the art capabilities, and it’s only going to get better.”
Google said it is going to roll out even more advanced versions of Gemini in the future.
“Gemini Ultra is coming soon. The team is already working on the next versions and bringing it to our products that starts with search,” said Google’s CEO. “We are already experimenting with Gemini in search, where it’s making our Search Generative Experience (SGE) faster for users. We have seen a 40-percent reduction in latency in English in the US.”
Gemini will be injected into core products, such as Google search and Google Ads, as the AI product looks to boost natural language conversational capabilities. Gemini was engineered to understand and combine video, audio, text, images and code in a natively multimodal way.