Presumably because it makes the office suite more competitive. Would you rather use Google docs or Microsoft office? I think most people use docs because it's free at a small scale, but plenty of enterprises use it as well. And it's much harder to switch office suites then LLMs so they're better off trying to lock people in on the data side rather than the LLM side.

> What I don't understand is, why would Google allow such direct competition to their own AI subscription?

They are much better off with you using "Google docs" then if Claude or someone else were to launch "Claude docs".

Google doesn‘t really need the money and this way they get more training data and google workspace users

Same reason they sponsor Firefox; it helps keep anti-competition lawsuits at bay?