Google Cloud's Q2 revenue crosses $10 billion, operating profit $1billion

Alphabet CEO Sundar Pichai said more than 1.5 million developers are now using Gemini family of AI models across its developer tools.

Google Cloud’s quarterly revenue crossed the $10-billion mark for the first time and operating profit $1 billion in the second quarter of 2024, Google parent Alphabet’s chief executive officer Sundar Pichai has said.

The milestones come amid rising demand among businesses and developers for the company's artificial intelligence (AI) offerings.

"Year-to-date, our AI infrastructure and generative AI solutions for Cloud customers have already generated billions in revenues and are being used by more than 2 million developers" Pichai said during the company's earnings conference call on July 23.

"We are innovating at every layer of the AI stack, from chips to agents and beyond. Our longstanding infrastructure leadership and in-house research teams position us well as technology evolves and as we pursue the many opportunities ahead."

Google Cloud’s revenue jumped 28.8 percent to $10.35 billion for the quarter, from $8.03 billion in the year-ago period. Operating income nearly tripled to $1.2 billion. Operating margin was at 11 percent.

Pichai said the company is seeing tremendous momentum from its AI investments with more than 1.5 million developers now using Gemini family of AI models across its developer tools.

Google Cloud's AI-powered applications portfolio is also helping the firm win new customers and upsell its offerings, Pichai said. Among new customer are Hitachi, Motorola Mobility and KPMG.

Gemini now comes in four sizes, with each model designed for its own set of use cases.

"It's a versatile model family that runs efficiently on everything from data centres to devices. At 2 million tokens, we offer the longest context window of any large-scale foundation model to-date, which powers developer use cases that no other model can handle," Pichai said.

Read: Google woos India's booming AI developer community with new tools, access to latest models

He said that software engineers at India’s Wipro are using Gemini code assist to develop, test, and document software faster while its conversational AI platform is helping customers like Best Buy.

Alphabet CFO Ruth Porat said the majority of the company's top 100 customers are already using its generative AI solutions and they continue to invest aggressively in the business.

In June, Google Cloud announced a partnership with Oracle to offer its customers Oracle Cloud Infrastructure database services and high-speed network interconnect to help accelerate their application migrations and modernisation.

Google Cloud is the only cloud provider to offer grounding with Google Search and the firm is now expanding these capabilities with third-party data sources such as Moody's, MSCI, Thomson Reuters, and ZoomInfo, Pichai said.

Grounding is the ability to connect the model output to verifiable sources of information in a bid to minimise hallucination.

Read: YouTube, Google Cloud to hit $100 billion in annual run rate in 2024: Sundar Pichai

To an analyst query on how Google sees artificial intelligence getting implemented by enterprises and the potential for AI workloads to be a stimulant to future revenue growth, Pichai said they are seeing early use cases and expect it to become a big driver over time.

"I think we are in this phase, where we have to deeply work and make sure on these use cases, on these workflows, we are driving deeper progress on unlocking value, which I'm very bullish will happen, but these things take time," he said.

Google Cloud's strong performance along with a rise in digital advertising sales drove the tech giant's overall revenue growth during the quarter.

Alphabet reported a revenue of $84.7 billion for the quarter, up 14 percent in the same quarter of the previous year. Advertising sales, the primary revenue source, rose 11 percent to $64.6 billion.

Alphabet's operating income grew 25.6 percent to $27.4 billion, while net income rose 28.6 percent to $23.6 billion.