Quarterly sales record for the internet’s biggest platform for ads to get overshadowed as Alphabet Inc will report the cost and operating profit of its Google Cloud business for the first time on Tuesday.
Google dominates rivals Facebook Inc and Amazon.com Inc in the ad business and has also created a surge in demand for both parts of Google’s cloud business: computing services for retailers and other companies and corporate productivity suites including tools like Gmail.
Google may be ready to show that its heavy investment in staff and data centres to catch up in the industry is finally paying off, say analysts.
An increasing concern for Wall Street related to Alphabet’s costs has been looming as sales growth from the advertising business flattens out. The company started disclosing Cloud and YouTube sales a year ago. Alphabet will provide a detailed annual breakdown for Cloud going back three years.
Wall Street analysts forecast fourth-quarter Cloud sales of $3.82 billion for Google, with expectations for the unit to cross $13 billion in annual sales, according to Refinitiv data.
The JPMorgan analysts estimate Google Cloud spent about 40% more in 2020 than Amazon’s cloud unit did in 2016 when it had about $12 billion in sales. Google’s spending reflects higher competition, as well as cloud vendors expanding into newer technologies.
Analysts expect Google’s advertising business will post $42.6 billion in fourth-quarter sales, pushing overall Alphabet quarterly revenue to $53 billion. That would leave Alphabet with 2020 sales of $179 billion and profit of $11 billion.