Google is set to release financial results for Google Cloud’s third quarter on Tuesday with high expectations for the roughly US$24 billion cloud company.
The big questions revolve around Google Cloud’s hiring status, the company’s recent acquisition of cybersecurity superstar Mandiant, and whether sales growth can continue to increase at such a rapid pace.
Google Cloud sales have been weak since CEO Thomas Kurian took over the reins in late 2018.
When he first arrived, Google Cloud was generating US$5.8 billion in total sales in 2018. In the second quarter of 2022 alone, the Mountain View, Calif.-based cloud company generated US$6.3 billion in total sales.
Google Cloud Momentum
Google Cloud held its annual Google Cloud Next 2022 conference this month where the company unveiled several new cloud technology offerings, including new BigQuery solutions, Workspace and virtual machines and Google partner incentives.
Google Cloud has also unveiled several new strategic partnerships such as Accenture and ServiceNow as the company strives to have the world’s most open cloud ecosystem and platform.
The company’s global channel head Kevin Ichhpurani said customers and channel partners are flocking to Google Cloud because of its openness, partner-centric go-to-market mantra and momentum of customer cloud innovation.
“If you look at what customers are doing today, they’re using analytics and AI to change their business process or invent a new business model,” Ichhpurani said. “They’re not just moving VMs to the cloud, but they’re modernizing those applications to support a new business process. Data and AI and app modernization are where the puck is going—and these are Google Cloud’s sweet spots.”
Google’s earnings for its third quarter 2022 are scheduled for Tuesday, Oct. 25 at 5 pm ET after the markets closed with top Google executives including CEO Sundar Pichai in attendance to weigh in on the results.
Here are the five biggest things Google Cloud customers, partners, and investors should watch out for.
Could Google Cloud Be Closer To Profit?
While Google’s cloud computing unit has had no problem increasing sales, it has not been profitable.
For its most recent second quarter in 2022, Google Cloud had an operating loss of $858 million.
In the first quarter of 2022, Google Cloud reported an operating loss of $931 million.
However, this continued operating loss is likely due to significant investment in infrastructure. To keep up with cloud demand on a global basis, Google pours billions every year into building, equipping and expanding its data centers that power its cloud services.
In a Q&A session at Google Next 2022, CEO Thomas Kurian said that Google Cloud’s profitability margin was negative 82 percent when he took over the company nearly four years ago.
Today, that figure is “approaching the single digits,” he said.
“Alphabet’s board has options to invest in many things, and based on the results they’ve seen from Google Cloud, they continue to invest in our business,” Kurian said.
What to look for: Whether Google Cloud’s operating loss will decrease or increase compared to the second quarter of 2022. This will show whether Kurian has the ability to make Google Cloud profitable in 2023.
Are Sales Increases Over 40 Percent Year Over Year?
Google Cloud increased sales by 36 percent year over year during its second quarter 2022 by generating nearly US$6.3 billion in sales.
For its first quarter in 2022, the cloud unit’s revenue rose 44 percent year-on-year by taking in US$5.8 billion in total sales.
In the fourth quarter of 2021, Google Cloud revenues increased 45 percent year-on-year to over US$5.5 billion.
Google Cloud has been growing cloud revenues over the past year at a breakneck pace.
What to look for: Whether third quarter year-over-year Google Cloud sales are above or below 40 percent growth. If sales growth exceeds 40 percent, it shows that Google Cloud has little way to go to win cloud market share going forward.
Is The Hiring Freeze On Google Cloud Officially Over?
Last month, Google Cloud executives said they were in the process of unfreezing Google’s hiring pause at the beginning of October.
Google Cloud plans to “complete” an employee hiring freeze in some areas, according to an internal memo sent to employees. The memo said executive leaders in some cloud teams are still trying to restart the acquisition process in some areas of Google Cloud in September.
In July, Google CEO Pichai said it was temporarily halting hiring. “We’re going to slow down our hiring and sharpen our focus as a company,” Pichai said during Google’s second-quarter financial earnings call with media and analysts.
However, it appears that Google Cloud won’t feel a huge impact in terms of a company-wide hiring freeze because Google will still be hiring technical talent. “We are still focused on hiring engineering, technical and other critical roles,” Pichai said.
What to look for: Whether Google executives are talking about eliminating or continuing its hiring freeze and what kind of staff it will continue to hire. Google Cloud should be safe if its parent company says it will still focus on hiring technical talent.
Will Google Provide Roadmap For Mandiant After US$5.4B Deal?
Google acquired security star Mandiant for US$5.4 billion last month.
The acquisition gives Google Cloud deep threat intelligence technology and expertise that Mandiant has built from working with the world’s largest organizations on the frontlines of cybersecurity.
Mandiant is now part of Google Cloud.
In a recent interview with CRN, Google Cloud security chief Jeff Reed said the integration is always a work in progress.
“Mandiant is unmatched in terms of the new capabilities that Mandiant brings,” said Reed, vice president of product for Google Cloud Security. “There’s nothing else like the amount of security capabilities we’ve brought to Google Cloud.”
Google Cloud is working on bringing together the culture and technology of the two companies.
“We know Mandiant has great threat intelligence, so it’s about how do we get that threat intel to Chronicle as quickly as possible? They do a lot of things from a proactive perspective, so how do we do that now [at Google]?” Reed said.
What to look for: Mandiant is Google’s biggest security acquisition in its history. With such strong expectations, it will be interesting and important to hear Google’s Pichai and other executives talk about the plan for Mandiant now as part of Google Cloud.
Is Google Meeting Its 2022 Multibillion-Dollar Data Center Commitment?
Earlier this year, Google CEO Sundar Pichai said his company would invest a whopping $9.5 billion in data centers and offices in the US by 2022.
“Our investments in data centers will continue to power the digital tools and services that help people and businesses thrive,” Google’s CEO said in April.
Throughout 2022, Google has announced more than US$1 billion in new data center projects in America and abroad, including Texas, Virginia and Oklahoma.
Google, Amazon Web Services and Microsoft are the top global spenders in new data center spending fueling customer and cloud growth in geographies where new centers are being built.
For example, AWS this month unveiled plans to invest US$5 billion in Thailand alone to build a new AWS data center cloud region.
What to look for: The big three cloud players—AWS, Google and Microsoft—need to continue investing billions in data center expansion to capture new customers of all shapes and sizes. With 2023 just a few months away, it will be interesting to see if Google makes another strong funding commitment specifically to data center expansion.
This article originally appeared on crn.com