Google's cloud and search divisions propped up a generally weak first quarter for 2022 from Alphabet, due in large part to increased investment, falling advertising revenue for its YouTube division, and the impact of the ongoing war in Ukraine.
Alphabet revenue for the first period of 2022 was US$68 billion, which is up 23 per cent from the same quarter in 2021. Profit was down eight per cent year-over-year to $16.4 billion.
Google CFO Ruth Porat told analysts that investment in real estate, data centers and headcount, as well as "content acquisition costs, primarily driven by costs for subscription content and then costs for YouTube's advertising-supported content," were the primary factors leading to the reduced profits for the quarter.
Google Cloud and Workspace was a bright spot in the earnings, with revenue up 44 per cent to $5.8 billion for the first quarter. This came at an operating loss of $931 million, as Google continues to invest in data centre infrastructure and increasing headcount.
Search also continue to drive massive revenue for the group, pulling in $39.6 billion for the quarter and accounting for nearly 60 per cent of group revenue.
YouTube advertising still contributed $6.9 billion for the quarter, but its growth rate slowed from 30 per cent last year to 20 per cent for the quarter, reflecting stronger competition and a more general waning of interest in video and streaming post-pandemic. YouTube is responding by investing in a TikTok rival called Shorts.
Porat also acknowledged that YouTube revenue was being impacted by the ongoing war in Ukraine, telling analysts that "the war did have an outsized impact on YouTube ads relative to the rest of Google.
That was both from suspending the vast majority of our commercial activities in Russia as well as, as I noted earlier, the related reduction in spend primarily by brand advertisers in Europe."
Meanwhile, Google Cloud is losing its most senior sales executive, Rob Enslin, at a time when it is investing heavily to close the gap between itself and public cloud rivals Microsoft Azure and Amazon Web Services (AWS).
Enslin joined Google Cloud as president of cloud sales from German software company SAP in April 2019. He was one of the first major hires of the new CEO of Google Cloud, Thomas Kurian, as the cloud division set itself ambitious goals to close the market share gap with Microsoft and AWS.
In that role he oversaw the tripling of Google’s customer-facing workforce, including aggressive global expansion. He has also been credited with growing Google Cloud’s SAP business by convincing enterprise customers to migrate their SAP workloads onto its infrastructure. His departure is part of a broader reorganisation of the sales and customer success structure at Google Cloud, according to reporting by Protocol.
Enslin is leaving to join the robotic process automation vendor UiPath as co-CEO alongside founder Daniel Dines from May 16.
“I’m bringing Rob on as my partner as we focus on growth at scale and building a company that reimagines how business is done,” Dines said in a statement. “Rob brings the right balance of experience and skills to scale our operations, allowing me to focus on our company culture, vision, and product innovation, areas I am passionate about—and that bring considerable value to our employees and customers.”