Google Cloud misses revenue expectations despite AI boom

Google CEO Sundar Pichai attributed the overall growth in the third quarter to the integration of artificial intelligence (AI) into almost every area. Despite struggling to compete with TikTok, YouTube still earned $7.95 billion compared to the expected $7.81 billion. In addition, views on Shorts increased to 70 billion views per day. In September, Google also announced the addition of AI-powered video editing to Shorts to boost the platform. Pichai said the company is working to make AI more useful to users.

But businesses are looking to rein in spending on expensive cloud services and artificial intelligence (AI) tools amid the economic downturn. Google Cloud’s third-quarter revenue of $8.41 billion was its slowest growth since the first quarter of 2021, falling short of the $8.64 billion Wall Street had expected.

This has investors worried that Google is at risk of falling further behind other cloud computing giants like Amazon and Microsoft's Azure. In the third quarter of 2023, Azure grew rapidly and posted higher-than-expected revenue and profit, earning $24.3 billion.

Cloud computing is a much more complex business than advertising, and Google Cloud faces fierce competition, said Max Willens, senior analyst at market research firm Insider Intelligence. Google Cloud’s partnerships with AI startups could pay off in the long run, but for now, the revenue is not enough to satisfy investors.

Alphabet laid off about 12,000 employees, or 6% of its workforce, in early 2023. The company also eliminated some employee perks to cut costs amid the economic downturn.