Google Believes its Superior AI Will Be the Key to Its Future

The company, the largest and most significant part of Alphabet Inc., has grown to mammoth proportions off the back of its search-based advertising division. But those revenues are starting to slow. The cloud allows companies to manage and sell server space and software that lives inside its data centers, like AI, to other large companies. That type of service-based business is fast becoming the new way to reap profits in the tech industry.

"We've always been doing cloud, it's just that we've been consuming it all internally at Google," CEO Sundar Pichai said on an earnings call with investors today. "But as we've grown — really matured in how we handle our data center investments and how we can do this at scale — we've definitely crossed over to the other side to where we can thoughtfully serve external customers."

That point is key for Google to retain customers as large as Netflix and Spotify, both of which pay Amazon to take advantage of its widely-used AWS cloud platform. Microsoft is the other big industry leader in the cloud, and its Azure product suite is growing rapidly. Google ultimately wants its cloud business to eclipse its advertising one by 2020, and the ambitious effort is central to the company's ongoing transformation into a business-class service provider.

While Google plays catch up on that front, Pichai sees his company's investments in AI techniques like machine learning as key to its success over rivals. "We've been investing in machine learning and AI for years, but I think we're at an exceptionally interesting tipping point where these technologies are really taking off," he said. "That is very, very applicable to businesses as well. So thoughtfully doing that externally we view as a big differentiator we have over others."

Pichai name dropped AlphaGo, the powerful AI software of its DeepMind subsidiary that bested Go master Lee Se-dol in the ancient Chinese board game last month. He also mentioned Diane Greene, the company's new senior VP for enterprise businesses, as another point of strength given her role as CEO of cloud pioneer VMware. "In the long run, I think in we will evolve in computing from a mobile-first to an AI-first world," Pichai said in closing. "And I do think we're at the forefront of developments."