Google Stock Slides, Still Touts Cloud

CEO uses slightly disappointing earnings results call to say enterprise cloud business is doing great.

April 21, 2016

3 Min Read
Google Stock Slides, Still Touts Cloud

Even as Wall Street was knocking down Google's stock, following what some considered a disappointing first quarter (earnings ONLY rose 20% and revenue was ONLY up by $3 billion-plus), the CEO of Google's parent company, Alphabet, continued to tout its enterprise cloud initiative to analysts, saying Google is "getting into much deeper conversations" with cloud users.

Google's stock was down about 6% after the earnings results showed Alphabet Inc. 's consolidated revenue rose to $20.26 billion from $17.26 billion and earnings per share excluding one-time items reached $7.97. Both things fell just short of analyst expectations. Google CFO Ruth Porat cited a negative foreign currency impact of $762 million, due to the strong US dollar but also reported a larger operating loss from Alphabet's "other bets" of $802 million, up from $633 million.

Those "other bets" losses stayed bearable because Google (Nasdaq: GOOG)'s ad revenues increased 16.2% to $18.02 billion, and paid clicks rose 29%, according to the announced results. Much of that growth was attributed to the spike in mobile search.

CEO Sundar Pichai acknowledged Google's continued success in the search/advertising area and continued efforts to improve in that space, including more intelligent matching of marketers to customers. But he saved some of his most glowing remarks for the company's enterprise cloud push. That effort might have needed a boost, given the recent outage of the Google Compute Engine. (See Google Apologizes for Cloud Outage, Offers Refund.)

Referencing GCP Next, the company's recent global user conference, Pichai said it "shows how serious we are," and called out GCP's "best in class security, reliability and analytics." (See Google: 'Dead Serious' About Enterprise Cloud.)

The Google CEO said the "quantity and quality of enterprise conversations has risen to a whole new level," after the event. Businesses are interested in learning more about how Google's machine learning capabilities are infusing its clouds, and how they can use analytics to make better use of their data, he said.

"We are now investing in go-to-market activities -- insuring we have the right expertise available for each of our customers," Pichai said. "We are enabling our service partners to access customers with everything from migrating to the cloud, to using machine learning to understanding their data."

And of course, Google is combining its GCP with its business applications, including Gmail, Google Docs and Google Drive. "It is gratifying to see immensely positive response [to a] powerful combo unique to Google," he said.

Another Google effort in the telecom space -- Google Fiber -- got much less airtime. In her presentation, Porat said the biggest chunk of the $280 million in capex going to Other Bets is for the Google Fiber buildout in the 22 announced cities. In response to questions, she and Pichai didn't add any new information to the announcements made of late, other than to say Google continues to learn from its experience and to work with the cities where it has announced deployments. (See Google Will Accelerate Fiber, Cloud in 2016.)

— Carol Wilson, Editor-at-Large, Light Reading

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