Alphabet Inc will report on the cost and operating profit of its Google Cloud subsidiary for the first time on Tuesday. The report is foreseen to exceed the overall quarterly sales for the ad platform.
The full disclosure comes after years of massive investment, and the increase in online work, shopping, and entertainment due to the pandemic.
Coronavirus pandemic led to an increase in demand for Google cloud services
The company has seen a fresh surge in demand for Google’s cloud business: computing services for retailers and companies, in addition to corporate productivity suites including tools like Gmail.
JPMorgan & Chase Co were among the few to protect the profits of Google Cloud. They estimated the company's 2020 operating margin to be at 2%.
When compared to Amazon’s Web operating, which has the highest cloud vendor revenue and recorded a final quarter operating margin of 30.5% and $3.5 billion in operating income, Google's projections are seen as more cost-efficient.
Google focused on its cloud computing services in 2016, five years after Amazon’s AWS become a multibillion-dollar company. Google’s spending implies a higher rate of competition in the cloud technologies space.
Analysts say Google is ready to show the fruits of its cloud venture
Analysts say that the company is ready to reveal that the heavy spending on staff and data centers were worth it. Alphabet’s operating costs have been a concern for Wall Street, as sales from the advertising business did not experience growth.
Alphabet Inc began divulging Cloud and YouTube sales a year ago. It is also expected to release its detailed annual breakdown of the Clouds revenue from 2017-2020.
Analysts also predict Google’s advertising business will post $42.6 billion in its final sales, pushing the overall Alphabet quarterly revenue to $53 billion. This would leave Alphabet with a 2020 sales revenue of $179 billion and a profit of $11 billion.
JPMorgan's analysts also predicted that Google Cloud used about 40% of its funds in 2020 than Amazon did in 2016 when AWS had approximately 12 billion in revenue.