First Glimpse At Google Cloud's Performance And Strategy
Dotan Horovits 🇮🇱🎗
Technology Evangelist for hire 🆓 | CNCF Ambassador | Podcaster | Speaker | Blogger
Last week Alphabet, Google's parent company, published its quarterly financial results. But this time it was different: for the first time it disclosed details on Google Cloud business. Well, it's about time, given that AWS and Microsoft have been reporting their cloud business financials for a good few years now. I'm no finance guy, but there's lots to learn from the stuff shared (as well as from what's NOT shared) in these reports.
Alphabet is a strong player. Just last month Alphabet has become the fourth US company to have reached $1 Trillion market cap, joining Apple, Amazon and Microsoft. But how strong is it in the cloud business, against those players?
Show me the figures
According to its report, Google Cloud generated $8.9 billion revenues in 2019, which accounts to 5.5% of the company's overall revenue. They show an impressive %53 increase of the sales year over year. Still this is a low figure, if you consider that AWS reported $9.95 billion in the last quarter alone and Microsoft reported $11.87 billion.
What does "Google Cloud" mean here, anyway?
"Google Cloud" in this report doesn't refer just to GCP (Google Cloud Platform, the rough equivalent of Amazon's AWS offering), but bulks together also G Suite (Gmail, Drive, Docs etc.) where business is more established, so we can't really know GCP's share of the business, though they stated:
The growth rate of GCP was meaningfully higher than that of Cloud overall.
Microsoft pulled off the same trick when it started reporting, bulking together Azure, Office365 and other SaaS services, and has been doing it since in different combinations. So when you see that $11.87 billion figure for Microsoft's "Intelligent Cloud", keep in mind it's not just Azure but also SQL Server, Visual Studio and a host of other products and services.
How profitable is it?
Google only reported the revenues, not the operational income, so we can't really tell how profitable Google Cloud is. Given Google's aggressive efforts to gain market share, I wouldn't be surprised if the customer acquisition costs and sales force headcount don't leave much of that revenue. Just for comparison, AWS reported $2.60 billion operational income, attributing %67 of Amazon's total income. Now THAT'S a profitable cloud business!
Where does GCP shine?
The report indicates GCP growth was led by the Infrastructure offerings and the Data and Analytics platform. Google also claims seeing "strong uptake of our multi-Cloud Anthos offering", which I'd assume refers to hybrid-cloud use cases where orgs migrate parts of their on-prem to Google Cloud. Are there also significant multi-cloud use cases in production, combining other private/public cloud vendors? Would be interesting to see.
Google is putting a lot of effort on analytics and AI (artificial intelligence) to gain leadership there. Another strategy is targeting vertical solutions combining GCP capabilities with other Google and Alphabet capabilities. Google gave some examples around Healthcare - combining cloud and AI to manage medical records while helping with diagnosis of disease; or Automotive - combining Cloud, Android Auto, in some cases Waymo. And let's not forget Google's advertisement ecosystem, enabling ads monetization around multiple use cases.
Alphabet's recent report shows that Google remains the challenger in the cloud domain, with revenues lagging behind Amazon and Microsoft and unknown profitability. But some interesting figures, aggressive GTM and growth engines show Google plans on putting up a serious fight.