Google Cloud is killing it

paas and iaas

It's Alphabet's fastest-growing business and now makes up more than a fifth of the juggernaut's revenue and operating profit

Since the beginning of the year, several people have remarked to me off the cuff, apropos of nothing in particular: "Google Cloud is killing it."

Parent company Alphabet reported Q2 earnings [PDF] after the bell on Wednesday and the numbers speak for themselves. Let's go to the tape:

• Google Cloud revenue was up 82 percent from the same quarter last year, increasing from $13.6 billion to $24.8 billion.

• Google Cloud operating income more than tripled during the same period, going from $2.8 billion to $8.8 billion.

Once the distant-third-place laughingstock of the IaaS platforms, Google's cloud business is now the growth engine of Alphabet and a significant contributor to the company's overall business, making up 21 percent of revenues and 22 percent of operating income. 

How'd this magic happen? The company's claiming it's all AI, citing "demand for AI infrastructure and AI solutions."

We have no idea if that's actually the case, given the plethora of more prosaic offerings from the Google Cloud team, but the company's Gemini marketing strategy – pushing it in front of hundreds of millions of searchers every day – can't be faulted.

Informal checks against our own sources suggest Anthropic Claude remains the go-to frontier model for most enterprise customers, and we're definitely hearing about companies switching between models to make the most of token costs vs effectiveness. But when the AI bubble finally pops, it could bring down money-losers OpenAI and Anthropic, and maybe even Oracle, which has gotten in a bit too deep.

Google, like the janitor at the end of the universe, will be there to pick up the pieces – and talent.  ®