Google Cloud’s 5 Big Earnings Takeaways: Hiring, Workspace, Mandiant

Here are the five biggest takeaways from Google Cloud’s third-quarter earnings results this week around Google’s hiring strategy in 2023, Workspace momentum and Google CEO Sundar-Pichai’s long term investment in its cloud business.

As Google Cloud sales soared to $6.87 billion during its third-quarter 2022 while the company added thousands of new employees, Google CEO Sundar Pichai said he plans to continue to invest heavily in Google Cloud for years to come.

“I’ve long shared that cloud is a key priority for the company. The long-term trends that are driving cloud adoption continue to play an even stronger role during uncertain macroeconomic times,” said Pichai during Google’s earnings report this week on its third-quarter financial results.

Google Cloud increased revenue by 38 percent year over year, compared with parent company Google’s 6 percent sales growth rate in third-quarter 2022. Google’s total sales were just over $69 billion.

Google Cloud Third-Quarter Earnings Highlights

Mountain View, Calif.-based Google Cloud was top of mind for Pichai and other Google leaders during the company’s third-quarter earnings report Tuesday.

Ruth Porat, CFO of Google, said the company is “excited about the long-term opportunities” for Google Cloud, which is now at a roughly $27 billion annual run rate.

“We do continue to invest meaningfully in this business. We’re still focused very much so on the path to profitability and free cash flow strength here,” said Porat. “But we are continuing to invest in the business.”

Google executives also touted the cloud business’ momentum around Google Workspace and its blockbuster $5.4 billion acquisition of cybersecurity superstar Mandiant.

Mandiant officially became part of Google Cloud last month, adding top-notch threat intelligence and incident response capabilities to its cloud portfolio and customer base.

“We are constantly working to make sure everyone we [hire] is working on the most important things as a company,” said Google CEO Pichai. “We are reviewing projects at all scales pretty granularly to make sure we have the right plans there, and based on that, the right resourcing and making course corrections. This will be an ongoing thing. It is something we will continue doing going into 2023 as well.

CRN breaks down the five biggest Google Cloud takeaways from Google’s third-quarter earnings results around future investments, Google’s hiring strategy, Mandiant, Workspace and operating losses.

Google Cloud Adds 2,600 Employees Via Mandiant

Google Cloud added more than 2,600 employees to its company, hailing from Mandiant.

“In September, we closed our acquisition of Mandiant, and are proud to welcome more than 2,600 colleagues to Google,” said Google CEO Pichai. “With Mandiant, we add industry-leading threat intelligence and incident response capabilities to help customers stay protected at every stage of the security life cycle.”

Google highlighted Google Cloud’s new Chronicle Security Operations suite that unifies security analytics, automation, response and threat intelligence.

“This has helped [IT power company] Vertiv analyze 22 times more security data, while cutting investigation time in half,” said Pichai.

Google Cloud security leader Jeff Reed recently told CRN that technology and personnel integration between Mandiant and Google Cloud was already well underway.

“We know that Mandiant had excellent threat intelligence, so it’s about how do we bring that threat intel on Chronicle as soon as possible? They do a bunch of things in a proactive perspective, so how do we do that now [at Google]?” said Reed.

Google ‘To Slow The Pace Of Hiring’ In 2023; Google Cloud Appears To Be Unscathed

Google CFO Porat said the company’s “actions to slow the pace of hiring will become more apparent” in 2023.

“With respect to Alphabet head count, we added 12,765 people in the third quarter—including more than 2,600 of those joining Google Cloud as part of our acquisition of Mandiant,” said Porat. “As in prior quarters, the majority of hires were for technical roles.”

In its current fourth-quarter 2022, Google expect head-count additions will “slow to less than half the number added” in its third quarter.

However, it appears likely that Google Cloud will not be affected by the slowdown in hiring at its parent company as Google’s CFO said it will continue hiring technology professionals.

“Within this slower head-count growth next year, we will continue hiring for critical roles, particularly focused on top engineering and technical talent,” said Porat.

Google’s CEO said “talent is the most precious resource.”

“So we are constantly working to make sure everyone we have brought in is working on the most important things as a company,” said Pichai. “We are reviewing projects at all scales pretty granularly to make sure we have the right plans there, and based on that, the right resourcing and making course corrections. This will be an ongoing thing. It is something we will continue doing going into 2023 as well.”

Google Cloud Operating Loss Of $699 Million

Google Cloud has still yet to generate a profit.

However, Google executives said they aren’t worried about it right now and will continue to invest heavily into the cloud business.

“As you can see from the results, we’re pleased with the momentum in cloud and do continue to be excited about the long-term opportunities,” said Google CFO Porat. “We do continue to invest meaningfully in this business. We’re still focused very much so on the path to profitability and free cash flow strength here. But we are continuing to invest in the business.”

Google Cloud reported an operating loss of $699 million for its third quarter.

However, the third-quarter loss is less than the operating loss Google Cloud has witnessed in prior quarters this year.

In second-quarter 2022, Google Cloud reported an operating loss of $858 million.

In Google Cloud’s first-quarter 2022, the company had an operating loss of $931 million.

Google Workspace Hits 8 Million Customer Milestone

Google Workspace is the company’s flagship business application and collaboration offering that includes Gmail, Drive and Google Meet, to name a few products.

As the shift to hybrid work continues, organizations are evolving to support an increasingly distributed workforce.

“I’m proud to share that Google Workspace is now used by more than 8 million businesses and organizations worldwide,” said Google’s CEO.

This includes the U.S. Army, which is transitioning 250,000 personnel to Google’s secure communication and collaboration platform.

“In the past year, we’ve announced nearly 300 new capabilities to support hybrid work,” Pichai said.

Google executives said strong revenue growth in Google Workspace was driven by growth in both seats and average revenue per seat during the third quarter.

Google CEO: Google Cloud A Long-Term ‘Key Priority’

Google’s CEO said Google Cloud is a long-term “key priority” for his company.

“The long-term trends that are driving cloud adoption continue to play an even stronger role during uncertain macroeconomic times. Google Cloud helps customers solve today’s business challenges, improve productivity, reduce costs and unlock new growth engines,” said Pichai.

During the earnings call, Google executives highlighted the slew of new products, services and partnerships made at Google Cloud Next 2022 earlier this month.

“Customers partner with Google Cloud because we offer a single platform that can analyze data across any cloud. Our leadership here is winning customers across industries, including the State of Hawaii and the Australia Securities Exchange,” Pichai said.

Google Cloud’s capabilities to solve difficult business challenges, such as supply chain and logistics—while also creating new growth opportunities—is driving customer demand.

“I’m proud of the trust and enthusiasm our customers are placing in Google Cloud,” touted Google’s CEO.