Google Cloud losses continue in latest Q2 earnings report

Google parent company, Alphabet, has reported lowered profits for consecutive quarters, despite overall revenue increasing for the business. The company’s Q2 2022 report reveals over a $2.5bn loss in profits compared to the same period last year, dropping from $18.5bn down to around $16bn.

Sales of Google Cloud continue to miss profit estimates, as the report shows growing losses of $858m in Q2, despite revenue increasing to $6.2bn for the division. These margins dig a larger hole in profits for Google Cloud, following on from previous annual losses of $5.6bn in 2020 and $3.1bn in 2021.

Rising levels of expenses could spell the workings behind Google’s ongoing falling profits, as though revenues were reported as $7.8bn higher in Q2 than the same period last year, the total costs have ballooned by $16.7bn. Research and development costs reportedly also rose by $3.8bn when compared with 2021 figures.

Speaking in the company earnings call, CEO Sundar Pichai states that Google was “continuing to see strong momentum and substantial opportunity in cloud” and was taking “the long view”.

“It still seems like the early stages of this transformation,” Pichai said. “I don’t necessarily view it as a longer-term trend as much as working through the macro uncertainty everyone is dealing with. We will continue to invest in areas like AI search and cloud and we’ll do it in a way that is responsive to the current environment.”

When asked about Google Cloud margins, Ruth Porat, CFO of Alphabet and Google, said: “Our view continues to be that this is a long-term opportunity. It’s a trade-off between revenue growth and immediate opportunity. We continue to focus on the path to profitability and free cash flow positive to drive attractive returns.”

The biggest income earners for Google this quarter are once again Google Search and YouTube ads, as the services have brought in almost $40.7bn and $7.3bn respectively. But figures suggest this represents the slowest growth for YouTube advertising in more than two years, as Variety reports.

Announcing a Google hiring freeze for the rest of the year last week, Pichai informed employees that these events come during a landscape of “uncertain global economic outlook” offering a lack of immunity to these “headwinds” for the big tech company.