It's also not even clear Google cares a lot about GAE profitability. When it first came out, there was only the free version, and the limits were there just to keep usage reasonable. As with many Google things, it seems like it was basically something they built internally for internal use, and then decided to make available to the internet for free.

Only after much clamoring by people who actually wanted to pay Google money for more usage did they offer a way to pay for higher quotas, almost a year after the initial rollout.