Google discloses more on cloud business as it looks beyond search

The tech giant has invested aggressively in its cloud division over the last few years.

Richard Nieva Former senior reporter
Richard Nieva was a senior reporter for CNET News, focusing on Google and Yahoo. He previously worked for PandoDaily and Fortune Magazine, and his writing has appeared in The New York Times, on CNNMoney.com and on CJR.org.
Richard Nieva
3 min read

Google's fourth-quarter earnings are out.

Angela Lang/CNET

Google on Tuesday revealed new financial details about its cloud division, a milestone as the technology powerhouse aims to expand its business beyond its massive search and advertising operation. 

The tech giant's cloud unit, which rents server space and artificial intelligence technology to other companies and organizations, showed growth in the fourth quarter though it remained unprofitable. Revenue rose to $3.83 billion, from $2.61 billion a year earlier. The unit posted an operating loss of $1.24 billion in the period, and $5.6 billion over the full year. 

More broadly, Google's business has thrived. For the quarter ended Dec. 31, Google parent Alphabet tallied a record $56.89 billion in sales, crushing analyst estimates of $53.12 billion. Earnings per share were $22.30, beating expectations of $15.90 per share, according to Refinitiv. Ad revenue on YouTube, which Google owns, soared 46% in the fourth quarter to $6.89 billion. 

Alphabet's shares rose more than 6 percent in after-hours trading.

"2020 was a year unlike any other," Alphabet and Google CEO Sundar Pichai said during a conference call with analysts. "Last year also accelerated the shift to cloud and adoption of online television, with profound implications for all companies and consumers."

The disclosure of new details related to Google Cloud comes as the company's search and targeted advertising business is under increasing attack by lawmakers as well as state and federal prosecutors. Google faces three major antitrust lawsuits, including a landmark case by the US Department of Justice, and another complaint by a bipartisan coalition of states.

Google revamped its cloud division in 2016, as the company sought to catch up to Amazon Web Services, the e-commerce giant's multibillion dollar cloud outfit. Since then, Google has made the business a top priority. The push has only become more pronounced during the pandemic, which has made many big companies more reliant on providing digital offerings.

The maturing of Google's cloud business, however, has come with challenges. The company's rank-and-file employees, among the most outspoken workforces in the tech industry , has protested Google Cloud's contracts with the US government. In 2018, employees petitioned against the company's involvement in Project Maven, a Defense Department initiative aimed at developing better AI for the military. 

Last year, employees pushed back against the company after it was reported that Google licensed its cloud software to US Customs and Border Protection. At the time, a Google executive reportedly defended the deal by saying the company's technology wasn't being used for immigration enforcement at the southern border.

Despite its growth in cloud computing, Google still has a lot of work to do to catch up to competitors. In October, Amazon owned 32% of the market, followed by Microsoft's Azure service at 17%, according to estimates by the research firm Canalys. Google Cloud was third at 7%.

Outside of the cloud business, Google also touted the success of YouTube. Watch time on the platform increased in the last year, Philipp Schindler, Google's chief business officer, said on the conference call. The spike came alongside the global pandemic as people spent more time in their homes sheltering in place.