Cloud Computing, Drugged by Artificial Intelligence, Boosts Google’s Profits

(San Francisco) Google’s massive investments in artificial intelligence (AI) are starting to pay off in the cloud, but the search engine’s perilous transformation has yet to translate into revenue.

In the second quarter, Alphabet, Google’s parent company, reported revenue of $84.74 billion (+14%), from which it generated net income of $23.6 billion, up 28%, according to a press release published on Tuesday.

These better-than-expected results are driven in particular by the good performance of its cloud computing activity (remote computing), which increasingly markets generative AI services to produce text, images or even lines of code, on simple request in everyday language.

“Our AI infrastructure and generative AI solutions for our customers have already generated billions of dollars in revenue and are used by more than 2 million developers,” Alphabet CEO Sundar Pichai said at an analyst conference.

For the April-June period, Google Cloud nearly tripled its operating profit year over year to $1.17 billion.

Number three in cloud computing (behind the two giants of the sector, Amazon and Microsoft), Google has thus succeeded in attracting numerous companies and young companies that need generative AI models to gain in productivity or develop new applications.

Pizza glue

The task is more complicated for services to the general public.

The spring launch of AI Overviews — Google’s generative AI juggernaut — was marred by strange, false, or absurd answers to user questions.

The platform thus suggested to an Internet user to mix “non-toxic” glue with cheese so that it would stick better to the pizza, undoubtedly inspired by comments on social networks used to train the AI ​​model.

Google has corrected the situation, and Sundar Pichai assured Tuesday that “all the feedback is positive.”

The gradual rollout of AI Overviews is leading to “more online research” and “more user satisfaction,” he added, particularly “among 18- to 24-year-olds.”

On monetization, Philipp Schindler, the group’s vice president, said that Internet users find the ads displayed in AI Overviews “useful” and believes the new format will “open up new opportunities for advertisers.”

AI Overviews “had a bit of a hit early on,” said Emarketer analyst Evelyn Mitchell-Wolf, and the “difficulties will continue in the second half of the year.”

In fact, the search engine’s advertising revenues came to $48.5 billion (+14%) in the second quarter.

Cookies and chips

YouTube’s revenue of $8.66 billion, however, disappointed, despite the service leading the streaming platforms in terms of audience.

Google has also just announced that it is abandoning plans to remove the highly controversial third-party cookies, which are used to track Internet users in order to target them with personalized advertising.

The Californian company can thus “start the second half of the year with this deadline less, freeing up resources for its AI initiatives,” commented Evelyn Mitchell-Wolf.

The technology giant has also just saved some 23 billion dollars, while the Israeli company Wiz, specialized in cloud computing security, has given up on being acquired, according to the American press.

Alphabet invested more than $13 billion in “property and equipment” in the second quarter, 91% more than the same period last year, a budget that reflects its need for new data centers and ultra-sophisticated chips needed for generative AI.

Investments which also have an environmental cost, with more efficient machines consuming more energy.

By 2023, Google saw its greenhouse gas emissions reach 14.3 million tons of CO₂a 48% increase from 2019, its baseline year, according to its annual environmental report.

“As we integrate AI into our products, reducing emissions may prove challenging,” the US group noted earlier this month.