The bulk of revenues for the quarter ($62.8bn) came from services, comprising search and advertising revenues. The cloud business contributed approximately $6.2bn.
Sundar Pichai, CEO of Alphabet and Google, said: “In the second quarter, our performance was driven by search and cloud. The investments we’ve made over the years in AI [artificial intelligence] and computing are helping to make our services particularly valuable for consumers, and highly effective for businesses of all sizes. As we sharpen our focus, we’ll continue to invest responsibly in deep computer science for the long term.”
The total cost of revenues was $30.1bn, up 15%, primarily. According to the transcript of the earnings call posted on Seeking Alpha, the biggest factors driving costs were associated with datacentres and other operations.
Despite reporting revenues of $6.3bn for the second quarter, up 36%, the Google Cloud business saw an operating loss of $858m, 46% more than the $591m operating loss in the same quarter last year. When asked about whether there was an urgency to drive GCP to a break-even position, chief financial officer Ruth Porat said cloud was a “long-term opportunity” and that “enterprise customers are still early in their move to the cloud”.
“We do very much have that debate. The question you posed is the right one, which is a trade-off between revenue growth and immediate profitability,” she added. “What we’re focused on is ensuring that we’re investing to support the long-term growth given the upside that we see. We continue to focus on it, and we are looking at the path to profitability, path to cash flow positive, to drive attractive returns.”
During the earnings call, Pichai discussed the company’s focus on AI and his plans to expand this investment. “We are also seeing a new frontier with augmented reality [AR],” he said. “We have been testing exciting prototypes in our labs, like the device we shared at [Google] I/O that puts real-time translation and transcription in your line of sight. It’s one example of how AR can solve real needs in the real world.”
The company is also planning to make improvements to support online shopping. “Our investments in commerce are another way we deliver helpful experiences,” Pichai said. “People are shopping across Google more than one billion times each day. We see hundreds of millions of shopping searches on Google Images each month.”
He said Google would soon be introducing functionality that will enable online stores to submit 3D images of their products, which will then appear directly on Google Search.