Google parent Alphabet spent a whopping $5.5 billion on capital expenditures in the most recent quarter, nearly doubling that output from a year ago as the company continues to expand its cloud business.
That figure is way down from last quarter when Google spent $7.67 billion, a number that was juiced by the $2.4 billion purchase of the Chelsea Market building in New York. The jump from $2.8 billion in capital expenditures a year ago to $5.5 billion this quarter comes from increased spending on data center construction, facilities and production equipment to support the Google Cloud business, add capacity to handle more YouTube subscribers and investments in machine learning, CFO Ruth Porat said during a call with investors.
The rise in spending on capital projects didn’t stop the tech giant from posting huge numbers for the quarter, beating analyst expectations and sending its stock soaring in after-hours trading. However, the massive $5 billion fine (€4.3 billion Euro) levied by the European Union for forcing manufacturers to pre-install Google Search and other apps on Android devices was a major drag on the company’s bottom line in the second quarter.
With the EU penalty baked in, Google posted earnings of $4.54 per share on $32.66 billion in revenue. Remove the fine and Alphabet’s earnings rise to $11.75 per share and net income soars from $3.2 billion for the quarter up to $8.3 billion.
Analysts surveyed in advance by Yahoo Finance expected Google’s parent company to post earnings of $9.54 per share on revenue of $32.17 billion for the quarter.
Alphabet ended the quarter with 89,058 employees, and Porat said the most sizable increases in headcount came from hiring engineers and sales people for the cloud business.
Alphabet continues to look up at Amazon Web Services and Microsoft Azure in the cloud market, although it did disclose earlier this year that combined revenue from Google Cloud and G Suite reached $1 billion a quarter. However, Google has to replace one of its top cloud executives after former Intel executive Diane Bryant departed the company.
Google CEO Sundar Pichai said in a call with investors that the company now has 17 cloud regions, with three more on the way. In the last quarter, Google opened regions in Los Angeles and Finland and announced a new region in Zurich.
Pichai called out notable cloud wins and customers during the call, include PwC, Domino’s Pizza, SoundCloud and Target. Pichai says the retailer “is migrating key areas of its business to the Google Cloud platform.”
Big retailers competing with Amazon are increasingly choosing to take their business to rival cloud providers of Amazon Web Services. One of the most high profile examples came just last week when Walmart announced a new five-year alliance with Microsoft.
Alphabet’s quarterly financials come on the eve of the Google Cloud Next conference. GeekWire’s Tom Krazit will be in San Francisco for the event; check back for coverage of announcements from the conference.
