I feel they entered the business because they AWS showed the industry that it actually has pretty good margins.

However, I think the sentiment is probably true that selling VPS is low-margin over the long-term, but i think the margins come from the other bits: global economies of scale, good infrastructure management & practices, and providing their proven internal technologies (ML/AI, managed distributed services). Long-term, it seems like Google could come out the winner, but only if the other aspects of business are also done well (like sales). It seems like Google Cloud is picking up market share, but still far away from the 3 As (AWS, Azure, Alibaba)