As the major FANGs and other tech giants report this earning seasson, one key number caught the attention of our partners. That is the second quarter capital expenditures of Alphabet almost doubled as Google pushes forward in building out data centers for products like its cloud services. The earnings report by Alphabet beat the street`s expected capital expenditures of $4.19 billion, by a wide margin, underscoring the long-term focus by these tech giants. While Amazon and Microsoft are ahead, Alphabet is making an effort to expand Google`s cloud division under the leadership of Diane Greene. Google is also expanding its data centers that are supporting brands like Youtube or in the area of search.
Costs in the first quarter were even higher, coming in at $7.3 billion because of a $2.4 billion charge for the purchase of another firm, Chelsea Market based in New York. It is important to note that this second quarter explosion in capital expenditures is the biggest percentage increase in outlays since 2014. So Google is clearly focused on expansion of the cloud business. When we drill down, it is apparent that Google`s determination to grow in the cloud is based on a wide range of possible uses and of course spending for all infrastructure – internally the number of hires to the firm confirms this view.
CEO Sundar Pichai told analysts that G Suite and Google public cloud for hosting apps for the company is now generating $1 billion dollars in revenue per quarter. The cloud is a category that contributed to revenue expansion for Alphabet as a whole.
Finally, it is clear that in the areas of hiring new talent, combined with marketing campaigns, Google is spending heavily in what seems to be a key growth area for the firm.
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