Google's Pichai: Cloud's One of Our 'Biggest Bets'

Mitch Wagner
4/28/2017

Google devoted a good chunk of its earnings call this week to talking about its cloud business. But Google stopped short of providing meaningful, quantifiable statistics on just how the cloud is performing.

"Google Cloud continues to drive sizable growth, with Google Cloud Platform remaining one of the fastest-growing businesses across Alphabet," Alphabet CFO Ruth Porat said on Thursday's earnings call, according to a SeekingAlpha transcript. Alphabet is Google's parent company.

Cloud drove the most sizable head count growth and capex investment for Alphabet, she said. Overall, company headcount was 73,992 at the end of the quarter, up 1,939 from the last quarter. The "vast majority of new hires were engineers and product managers," she said.

Google CEO Sundar Pichai said cloud, YouTube and hardware are the company's "biggest bets."

Pichai said Google is becoming an "AI-first" company, with Google Assistant being a first step, and machine learning improving products such as Google Maps.

Google has struggled with attracting enterprise customers in the past, but now it's a "deep enterprise company," Pichai said. He singled out retail as a sector in which Google has been particularly successful, but did not provide specifics.

Despite the enthusiastic talk, Alphabet didn't break out separate performance indicators for its cloud business -- not revenue, headcount or other metrics.

For the quarter ending March 31, Alphabet saw revenues of $24.8 billion, up 22% year-over-year. As always, Alphabet continues to be a company driven by ad revenue -- $21.4 billion, up from $18 billion in the year-ago quarter. Net income was $5.4 billion, up from $4.2 billion a year earlier, and diluted earnings per share were $7.73, up from $6.02.

Google cloud revenue falls in the category of "other revenues," and is a small part of the company's business, $3.1 billion. But that category is growing -- up from $2 billion the previous year.

Alphabet traded at $929.39 mid-day Friday, up 4.26% from market opening.

Google has set a lofty goal for its cloud business, setting a mark for cloud revenue to exceed ad revenue by 2020. To find out more about how it's doing on achieving that goal, see our special report: Google's Big Enterprise Cloud Bet.

Marquee customers include Colgate-Palmolive, Verizon Communications, Home Depot and HSBC. (See Google: Still the New Kid in Enterprise Cloud.)

Another big, recent win for Google Cloud Platform is Evernote, which moved from its own data centers to Google Cloud Platform in just 70 days at the end of 2016. (See Why Evernote Picked Google Cloud Over Amazon.)

Evernote provided details on that project on a live webinar -- catch the live playback here: Evernote's Journey to the Cloud.

Amazon and Microsoft also reported earnings this week. Amazon reported impressive growth for Amazon Web Services Inc. (AWS), even though the rate of growth is slowing. AWS pulled in $3.66 billion in sales, up 43% year-over-year. For most of last year, growth was over 50%, only dipping to 47% in the final quarter. (See AWS Sales Still Impress Even With Small Slowdown.)

Amazon is in a class by itself in the cloud market, controlling 33%, bigger than Microsoft, Google, IBM, Alibaba and Oracle Corp., according to an April 27 report by Synergy Research Group. (See AWS Public Cloud Dominance Continues – Report.)

And Microsoft Azure revenues were up a brisk 93% year-over-year -- also a slowdown, as Azure revenues have previously doubled annually. (See Microsoft Wants Azure to Blur the Enterprise Edge.)

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— Mitch Wagner Follow me on Twitter Visit my LinkedIn profile Visit my blog Friend me on Facebook Editor, Enterprise Cloud News

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kq4ym
kq4ym
5/14/2017 | 5:48:29 PM
Re: Google's search
It does seem that Google's got a long way to go to catch up in the cloud business, but they've got lots of the engineers and more hired all the time to try to get that part of the business moving a bit more rapidly to catch up with AWS. Interesting though that as noted "Google stopped short of providing meaningful, quantifiable statistics on just how the cloud is performing." 
Joe Stanganelli
Joe Stanganelli
5/1/2017 | 7:46:03 AM
Re: Google's digital assistant
@John: Michelle is right.  In fact, to my knowledge, they all are.  Even Siri (which is why you can't access her if you're having connectivity problems).

Not only are these tools very helpful, but they're fun -- with various Easter eggs implanted for various special commands.
Joe Stanganelli
Joe Stanganelli
5/1/2017 | 7:43:29 AM
Re: Ready, steady, go
@Michelle: There's your explanation then!  (Part of it, at least...)
Michelle
Michelle
4/30/2017 | 8:18:29 PM
Re: Google's digital assistant
Yes, it's cloud-based. I believe it pulls info from a variety of sources to provide you with an answer.
JohnMason
JohnMason
4/30/2017 | 12:36:14 PM
Google's digital assistant
Isn't Google's digital assistant cloud based? That feature has been a tremendous help to me. I can use voice commands to find all kinds of esoteric material (but useful to me) and have the answer read to me in a flash.
Michelle
Michelle
4/30/2017 | 10:53:15 AM
Re: Ready, steady, go
@Joe Wow, just 5 years? That's inline with computer hardware...ouch.
Joe Stanganelli
Joe Stanganelli
4/30/2017 | 10:37:03 AM
Re: Ready, steady, go
@Michelle: To be sure, the average engineering degree obsolesces in something like 5 years, on average.  So that sounds about right to me!
maryam@impact
[email protected]
4/29/2017 | 11:50:41 PM
Re: Ready, steady, go
@ Michelle exactly the market is still new so the mix of new players existing players and technology will most certainly result in shifts over the short and long term.
Michelle
Michelle
4/29/2017 | 8:29:11 PM
Re: Ready, steady, go
@Maryam It's hard to imagine what the landscape will look like in 5 years (or less). Perspective is everything...
Joe Stanganelli
Joe Stanganelli
4/29/2017 | 7:17:33 PM
Re: Google's search
@ak22: I'm heavily inclined to agree with you.  Personally, I am neutral about (or in a few cases, antipathetic toward) almost all of Google's products/solutions -- except the search engine.  Even though I value my privacy, DuckDuckGo and the like simply can't compete with Google's algorithms.
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