Google's biggest challenge in the cloud space is scaling up Google Cloud fast enough to meet customer demand for its technology, Google CEO Sundar Pichai told industry analysts today in parent company Alphabet's third-quarter earnings call.
Pichai claims Google (Nasdaq: GOOG)'s superior technology -- he cites machine learning and the open Kubernetes container platform -- is winning over enterprise customers and will do so even more in the coming year as Google scales up its sales teams and continues to strike key partnerships. And while Google doesn't break out its cloud revenues, the revenues of the "other" category into which it falls were up 40% to $3.4 billion, according to Ruth Porat, CFO.
That still puts it well behind Amazon Web Services in the cloud space, leaving Google determined to grow share while being flush with the resources to do that.
Overall, Alphabet Inc. 's earnings came in significantly above analyst earnings and 24% higher than the previous year's quarter. Third quarter revenue for 2017 was $27.8 million, up from $22.5 million a year ago, on revenue of $27.77 billion vs. $21.95 billion expected by analysts, according to Bloomberg. Earnings per share were $9.57 versus the $8.34 expected.
On the cloud front, "the main area where we need to get better is to scale our go to market and be in more places to effectively get more customers," Pichai said. "We are doing that a few different ways."
One is by bulking up sales and technical staff. Porat said Google added almost 2,500 positions in the quarter "and the highest number of people hired was for the cloud business, both technical and in sales, consistent with the priority we place on this business."
Pichai cited yesterday's partnership announcement with Cisco Systems Inc. (Nasdaq: CSCO) and deals made earlier this year with VMware, Pivotal and SAP as essential to Google Cloud's scaling strategy.
He also touted what he called Google's technical advantage in the cloud space.
"Our customers tell us they are switching to Google Cloud platform because of our prowess in data and optics and machine learning, and our commitment to being an open platform with tools like Kubernetes, which runs in both cloud and hybrid environments and our leadership in security," he said. "We are letting our customers more easily run apps both on prem and in the cloud and we are doing this all in open way with Kubernetes. That is the overall strategy and I think it is paying off and you will see us scale across all these dimensions of cloud in the year ahead."
A few other highlights from the earnings call:
- Google Fiber Inc. was notable in its absence from the discussion. Other than mentioning the positive impact on capex of having halted construction, there was virtually no mention of this project nor any questions from the analyst community. The "Other Bets" category in which it is included did trim its losses in the third quarter to $812 million down from $861 million a year ago.
- YouTube has apparently bounced back from subscriber losses due to objectionable content, as both Porat and Pichai mentioned its strong performance, with the latter citing "phenomenal growth." Pichai also said the subscription-based model is expanding and that Google will continue to invest in "new subscription-based monetization models." YouTube Red, the first move in that direction, will release more than 40 originals shows and YouTube TV, the live subscription service, now covers two thirds of US households.
— Carol Wilson, Editor-at-Large, Light Reading