Nico Grant (Bloomberg) -- Alphabet Inc. said its Google Cloud business had an operating loss of $1.2 billion in the fourth quarter, a new disclosure that may disappoint some Wall Street analysts.
The Mountain View, California-based company revealed the number on Tuesday in a statement. For 2020, the cloud division lost $5.6 billion, Alphabet said.
“An important element of our operating loss is that we have been building out our organization ahead of revenue, and that includes our product portfolio, the network of data centers,” Ruth Porat, chief financial officer of Alphabet and Google, said in an interview with Bloomberg Television. This will help the company pursue this large market opportunity, she added.
Google Cloud revenue climbed 47% to $3.8 billion in the fourth quarter, matching analysts’ estimates, according to data compiled by Bloomberg.
Brian Fitzgerald, an analyst at Wells Fargo & Co., was looking for Google Cloud to generate an operating margin of less than 20% in the fourth quarter, or roughly $750 million in profit on revenue of $3.75 billion.
Morgan Stanley’s Brian Nowak expected Google Cloud to make about $3 billion last year, before interest, taxes, depreciation and amortization.
The results are way behind Amazon.com Inc., which runs Amazon Web Services, the largest cloud provider. That business generated fourth-quarter operating income of $3.56 billion on revenue of $12.7 billion.
Google Cloud Chief Executive Officer Thomas Kurian is trying to catch Amazon and Microsoft Corp. He has spent rapidly to expand the cloud sales force and the company has continued investing in new data centers.
Some analysts expect profitability to emerge as the division matures. Morgan Stanley’s Nowak sees Google Cloud’s EBITDA reaching $13 billion by 2024 on revenue of $35 billion.