Alphabet Earnings: Google’s Hardware, Services Business See Little Growth (Premium)

Google parent Alphabet reported quarterly profit of $9.4 billion on revenues of $31.1 billion, well above estimates. Of particular interest to Thurrott.com readers are the results for what the firm calls "Google's other revenues." This includes its cloud services plus the Pixel, Home, Nest, and other hardware devices.

The majority of Google revenues, of course, come from advertising. And my "majority," I don't mean 51 percent, I mean about 86 percent. That's an improvement over previous years when ads presented well over 95 percent of Google's revenues. But it's fair to describe the Google products and services that end users see and use as unsustainable. They simply could not, and would not, exist without the ads.

That said, "Google's other revenues" are starting to grow: For the most recent quarter, revenues hit $4.4 billion, a jump of 36 percent year-over-year. "We saw increasing momentum,” Google CEO Sundar Pichai said of the business unit, which now accounts for about 14 percent of Google's revenues.

That may be true, technically. But in the year-ago quarter, "Google's other revenues" contributed 13 percent of total revenues. And that was before Nest included in the math. (Google sucked Nest into its hardware business last year.)

More to the point, none of these businesses are really threatening major cloud players like Amazon or Microsoft, or major device makers like Apple. Google had previously said that its Google Cloud Platform, which includes G Suite, had hit about $1 billion in quarterly revenues. So that business is only roughly one-tenth the size of Office 365.

But Pichai also noted that Google's hardware business would need "three to four years" to get to the scale he'd like to see. I don't see how one percent growth year over year is going to help it reach "scale," frankly, not in that time frame.

And as I've written previously, while unit sales is indeed Google's biggest issue, it's not the only one: Google has serious quality problems to contend with too.

This is all the data I have to work with now, but I'll keep digging to see if there's more to this story. From what I can see, however, Google's actual products and services don't appear to be performing all that well.