The Six Five team discusses Google Cloud Q4 FY2023 earnings.
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Transcript:
Patrick Moorhead: So first off, $9 billion in revenue. I can safely say that would mean a $40 billion trajectory for revenue, up 26%. Quite frankly, at the end of the year, they could be bigger than SAP and Salesforce as a company. And that is amazing, right? They don’t sell hardware, right? It’s all services, which I think is just amazing. They made almost a billion dollars in OpInc. Do you remember when part of the conversation on all of our podcasts was, are they going to ever make money, right? But 864 million in OpInc. That’s not in net income, but you can very much compare that with the AWS line that’s in there.
So Vertex, 6X API request, which is big and interesting. Samsung Galaxy S24, they brought in as examples, and it’s funny, I’d always thought that as B2C, but it’s B2B. It’s Google Cloud. And a lot of our analysis on the new S24 and Galaxy AI were the services that they were leveraging from Google Cloud. And I just thought that was fascinating. So they reiterated, 75% are generative AI unicorns. That’s been a talking point for the last three quarters. They’re sticking to that. I think it’s pretty easy to say they’re getting some lift from generative AI. I wish they would put a dollar or percent lift from generative AI like we’re seeing from companies, but maybe we’re going to have to wait till the next quarter.
Daniel Newman: And there you have it. Straightforward, Pat. But yeah, I mean look, they’re running towards a 40 billion a year business, so it’s significant. It’s consequential. It’s interesting, Pat, I do think, and I said this earlier in my Microsoft remarks, how the accounting for cloud revenue is becoming so disaggregated in terms of each company’s approach that the comparison of who’s one, who’s two, who’s three is going to get harder and harder as time goes on because it’s just what’s being baked in as cloud is not going to be the same. Having said that, Google’s growing a very significant business. It’ll be interesting to see what Oracle comes out with, by the way, in the next quarter as well. But the rest of Google did well.
I mean, look, and when I say do well, I mean it beat. Having said that, it didn’t do it in the right areas. People wanted more out of YouTube. They wanted more out of overall advertising. Those numbers looked a little soft. And when you saw Meta’S numbers come in and how well Meta did, it definitely put some additional pressure on Google because it kind of kicks around. I’ve said for a long time, Google’s above the fold, Google Ads. But Meta, for whatever reason, it’s like they found another gear. When they finally turned off the I’m nuts for Metaverse and got focused back on their core business, they tend to be really good at that.
Now, again, not trying to distract from the Google conversation. I’m just saying Google’s got a strong rise. Their business is mature, the growth rates have become mature. They’re not as exciting anymore. Cloud’s one of their biggest growth areas. It will be interesting, Pat, to actually hear what you said because we need to hear what you said, is how much is AI? We always said Google Cloud is kind of the cool AI cloud. It was the one that originally we thought was more data-centric, AI centric, and that was a differentiator. I would love to hear them talk about how that’s impacting the business. That’s something that I’m waiting for. But having said that, I mean, what a really great growth trajectory and run. And also in operating income, Pat, almost a billion dollars of OpInc coming out of that business.
Now, I haven’t gotten underneath it to see if there was any accounting done. I know the first time they made a profit, there was a lot of scrutiny as to how that was done, with depreciation and some different things. But you know what? Like I said, nobody scrutinizes non GAAP earnings anymore. That’s just what we’ve all become accustomed to. So having said that, overall, advertising I think remains strong. Google is core. I’m also interested in kind of the Gemini move, how that’s maturing, how that’s being adopted. It was a very exciting launch. Also had a little controversy around it, but largely was positive. But again, how is that being adopted? How’s that being used? How’s that driving revenue?
I mean, look, what has made Microsoft so successful, in my opinion over the last four to six quarters has been a willingness to disclose the impact that AI is having on its business. And other than NVIDIA, very few are doing that. And so people want that. When you’re not giving that, knowing how good it’s been for the market, you kind of worry that there’s a reason. But having said that, maybe it’s also a coming out moment. We heard Tim Cook this week say he’s going to talk about generative AI sometime later this year. Pat, that’s two years after. He’s two years late. You know what? He’s chilling. Tim Cook’s chilling. He’s like, “We’re fine. Apple doesn’t need to be early. Haven’t been early in a long time.” And it works. Someone said to me, what was it? That Apple could come out with a new product, which is basically they could take a dump in a box and there’d be 10 million people willing to buy it.
Patrick Moorhead: Yeah. I don’t know if you put that meme out there, but I saw that too. And I’m reading Steve Jobs’ biography, another one. And the classic comment comes up that the best artists steal. That’s his line. And well, there we go. Rarely first, but they make an impact when they come out.
Daniel Newman: One of my MBA professors stole a line that was basically that the best marketers copy and steal everything. So he stole a line that ended up talking about stealing. Anyways, that’s China. China’s entire business strategy, right?
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
