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

Google executives talked up the cloud on its earnings call this week, though the company declined to provide specifics.

Mitch Wagner

April 28, 2017

4 Min Read
Google's Pichai: Cloud's One of Our 'Biggest Bets'

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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About the Author(s)

Mitch Wagner

Executive Editor, Light Reading

San Diego-based Mitch Wagner is many things. As well as being "our guy" on the West Coast (of the US, not Scotland, or anywhere else with indifferent meteorological conditions), he's a husband (to his wife), dissatisfied Democrat, American (so he could be President some day), nonobservant Jew, and science fiction fan. Not necessarily in that order.

He's also one half of a special duo, along with Minnie, who is the co-habitor of the West Coast Bureau and Light Reading's primary chewer of sticks, though she is not the only one on the team who regularly munches on bark.

Wagner, whose previous positions include Editor-in-Chief at Internet Evolution and Executive Editor at InformationWeek, will be responsible for tracking and reporting on developments in Silicon Valley and other US West Coast hotspots of communications technology innovation.

Beats: Software-defined networking (SDN), network functions virtualization (NFV), IP networking, and colored foods (such as 'green rice').

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