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Google Assesses Its Strengths in Its $1B Per Quarter Cloud Business

Google Cloud Platform is carving out a niche among enterprise customers, finding strength in areas such as open source support and machine learning as it goes up against much bigger competitors, Google CEO Sundar Pichai said on a quarterly earnings call Monday.

Google (Nasdaq: GOOG) is the fourth-largest cloud provider; it lags behind Amazon, Microsoft and IBM, according to a recent report from Jefferies & Company Inc. Amazon, in fact, is so far in the lead it has more cloud-based revenue than the next four competitors combined, including Google. (See Google & Alibaba Cloud Gaining Fast in Public Cloud – but AWS Still Rules.)

But Google is growing fast, Pichai said in a quarterly earnings call for parent company Alphabet Inc. Monday afternoon.

Open source and machine learning are strong points Google sees in itself as it goes up against bigger competitors in enterprise cloud.
Open source and machine learning are strong points Google sees in itself as it goes up against bigger competitors in enterprise cloud.


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Google doesn't break out cloud revenue from other revenue, but Pichai noted Monday that cloud revenue exceeded $1 billion per quarter last year, with momentum increasing and revenue growth accelerating in the first quarter. The company is signing bigger customers.

What's drawing in enterprise customers to Google Cloud ? Security and analytics, Pichai said. Customers are also drawn by machine learning, support for open source standards, particularly Kubernetes. And Alphabet sees synergies between G Suite and Google Cloud Platform, he said.

Alphabet reported revenues of $31.1 billion, up 26% year-over-year for the first quarter 2018 quarter ending March 31, and beating analyst expectations of $30.36 billion. Operating income was $7 billion, with diluted earnings per share of $9.93 adjusted, compared with $9.28 expectations.

In the category of "other revenues," which includes Google Cloud Platform, Alphabet saw revenues of $4.35 billion, up a hefty 36% year-over-year, the company said. "Other revenues" also include Google's hardware, as well as the Play Store. As of this quarter, "other revenues" includes Nest hardware, previously included in a category Alphabet calls "other bets."

Revenue increased 14% to $150 million in the "other bets" category, which including Google Fiber and the life sciences brand, Verily. Losses there narrowed, to $571 million from $703 million in the year-ago quarter.

Google continues to be the main engine driving Alphabet's business, pulling in $22 billion, up from $17.4 billion year-over-year. And ads still dwarfed other revenue sources, with ads pulling in $26.6 billion, up 24% year-over-year.

Alphabet stock traded at $1,073, down less than 1% in after hours trading.

Alphabet's complete earnings press release is here.

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— Mitch Wagner Follow me on Twitter Visit my LinkedIn profile Visit my blog Follow me on FacebookExecutive Editor, Light Reading

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