Google continued to plow the profits from its search advertising business into cloud computing capacity and headcount during the fourth quarter of 2018, as its cloud business enters a new era under a new leader.
For the period ending Dec. 31st, Google recorded $6.8 billion in capital expenditures driven by spending on offices, data centers and servers, said Ruth Porat, Google’s chief financial officer, on a conference call discussing Alphabet’s quarterly earnings Monday. That’s a 80 percent increase over its capital expenditures in the fourth quarter of last year.
Cloud engineers and sales professionals also made up the bulk of the 4,000 employees it hired during the quarter, Porat said. Google is well behind rivals like Amazon Web Services and Microsoft in the cloud infrastructure market, and at the moment it is spending more than them per quarter on capital expenditures to support that business.
Google also noted that its G Suite office productivity cloud service now has 5 million paying customers. Last year Google chose its fourth-quarter earnings call to disclose a quarterly cloud revenue run rate above $1 billion, but it has declined to update that number since that disclosure.
Google CEO Sundar Pichai made sure to thank outgoing Google Cloud CEO Diane Greene for her efforts during his prepared remarks. He declined to name a specific number, but noted that Google’s cloud business became a “multibillion dollar business” under Greene’s leadership; “that was not the case three years ago,” he said.
Greene and incoming leader Thomas Kurian are planning Google Cloud’s 2019 strategy together, Pichai said, and the company plans to increase hiring in sales and marketing in hopes of adding more multiyear big-company cloud deals.
Overall, Alphabet recorded $39.3 billion in revenue during the fourth quarter, with Google’s advertising business accounting for the vast majority of that revenue. Despite beating Wall Street’s expectations, investors seemed a little wary of increased expenses during the quarter, sending the stock down three percent in after-hours trading.
[Editor’s note: This post was updated to clarify Pichai’s quote.]