In the first quarter, Google Cloud's revenue is up 52% year-over-year

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Despite the coronavirus pandemic, Google Cloud heads towards a $10 billion revenue run rate in 2020. (Pixabay)

While some areas of Alphabet have struggled during the COVID-19 crisis, Google Cloud continued to be a cash cow in Q1. Google Cloud, which includes Google Cloud Project (GCP) and G-Suite, generated $2.78 billion in revenue in the first quarter, which marked a 52% increase over the same quarter a year ago.

While Google doesn't break out Google Cloud Project's revenues separately, it's a safe bet that a large chunk of its first quarter revenue came from the cloud. Google Cloud posted $8.92 billion in revenue for all of 2019 and $2.61 billion for the fourth quarter. Google Cloud's revenue increased 53% in the fourth quarter.

With the new numbers, Google is on pace for a run rate of $10 billion in annual revenue this year.

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Alphabet's after market earnings report on Tuesday marked the second time that Google has broken "Google Cloud" out as a line item that includes all of the company's cloud computing business.

RELATED: Google announces $10B U.S. investment across 11 states

While Google Cloud posted a large year-over-year jump in revenue, Amazon Web Services and Microsoft Azure still have their earnings reports forthcoming.

"Once again, the growth rate of GCP was meaningfully higher than that of cloud overall," said Alphabet CFO Ruth Porat, according to a Seeking Alpha transcript. "GCP growth was led by our infrastructure offerings in our data and analytics platform.

"With respect to the implications of the global crisis for Google Cloud, we’re proud of the accelerated traction we achieved across sectors, including public sector and healthcare for disease monitoring and control, working with leading retailers on demand forecasting working with companies across media and communications to enhance their customer service and across industries on supply chain optimization."

Porat also said that Alphabet would slowdown the pace of hiring new employees and the rate at which it acquires new office buildings this year. Google plans to spend more capex on servers than data centers this year. Overall, Alphabet/Google is planning a slight decrease in capex for the remainder of the year.

"We are taking a long view and continuing to invest in our long-term priorities, but are being thoughtful in the short-term," said Alphabet and Google CEO Sundar Pichai during the earnings call. "So we made the decision to slowdown the pace of hiring in the reminder of 2020, while maintaining momentum in a small number of strategic areas.

"We are also recalibrating the focus and pace of our investments in areas like data centers and machines, and non-businesses essential, marketing and travel."

Pichai said Google Meet, which is the company's video conferencing platform, is adding roughly 3 million users each day and that it has seen a 30-fold increase in usage since January. Pichai said there are now more than 100 million daily Meet video conferencing participants.

Google Meet competes against other video conferencing platforms such as Zoom, Blue Jeans, which was recently bought by Verizon, and Microsoft Teams.

On Wednesday, Google announced that Meet was now available for free until September 30, but users need to have a Google account. Previously, users needed a paid-for G Suite account to use Meet. Google is allowing up to 100 users to be on a Meet video conference, but it said at the end of September it could restrict the meeting length to 60 minutes.

Alphabet's Q1 numbers

Alphabet reported revenue of $41.2 billion in the first quarter while analysts had predicted $40.3 billon. Alphabet posted earnings per share of $9.87 compared to analysts' average of $10.38.

While "search" was up to due to people seeking more information on COVID-19, ad revenues were down. Porat summed up the first quarter as a "tale of two quarters" as the impact of the coronavirus increased in March.

"For our advertising business, the first two months of the quarter were strong," Porat said. "In March, we experienced a significant and sudden slowdown in ad revenues. The timing of the slowdown correlated to the locations and sectors impacted by the virus and related shutdown orders.

"For the second quarter so far, I think it’s premature to gauge, given uncertainty in the environment, and a few weeks, obviously, is not a quarter. So in such an unprecedented crisis, I would not want you to extrapolate from just a couple of weeks."

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