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TechPointCloud

Google Execs Insist Cloud Business Is Growing Without Providing Details

Barb Darrow
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Barb Darrow
Barb Darrow
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Barb Darrow
By
Barb Darrow
Barb Darrow
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October 28, 2016, 2:30 PM ET
Google CEO Sundar Pichai speaks during the Google I/O 2016 developers conference in Mountain View, California
Google CEO Sundar Pichai delivers his keynote address during the Google I/O 2016 developers conference in Mountain View, California, U.S. May 18, 2016. Stephen Lam — Reuters

Google is still synonymous with Internet search and advertising, but the company continues to push its cloud business as a priority. As to how big that nascent business really is? Well that’s anyone’s guess.

On Thursday, Google (GOOG) parent company Alphabet logged adjusted earnings per share of $9.06 on revenue of $22.45 billion, handily beating consensus estimates. Total revenue was up 20% year over year.

But specifics about Google’s cloud effort were in short supply. That business includes the company’s Google Cloud Platform, which competes with Amazon Web Services, and its popular G Suite (formerly known as Google Apps), which competes with Microsoft Office.

What we learned from Google’s earnings call is that cloud—along with Google Play, the company’s online music and video business, Chromecast hardware, YouTube Red subscriptions and other things—drove 39% growth in Google’s “other revenue” to $2.543 billion from $1.75 billion for the same period last year. That’s a healthy number but it also covers an awfully wide range of things.

To be fair, Amazon just started specifying its AWS results in April 2015, and Microsoft’s cloud results include traditional software like Windows Server that runs on-premises. So obfuscation is the norm here. The same day Google reported its results, Amazon said AWS sales hit $3.2 billion for its third quarter, up nearly 55% from $2.08 billion for the year-ago period.

During Alphabet’s earnings call, chief financial officer Ruth Porat said cloud is generating “substantial revenue growth, reflecting the ongoing momentum in the business as well as the enormous opportunity in this area.”

And Google chief executive Sundar Pichai stressed that the company’s line of hardware devices, promising they will bring much more cloud-based value and functionality to the masses.

“This new era is one in which people will experience computing more naturally and seamlessly in the context of their lives, powered by intelligent assistants and the cloud. This transition is as significant as the move over the last decade from desktops to mobile devices,” Pichai said.

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In the public cloud infrastructure market, one company (in this case, Google) aggregates masses of servers, networking, and storage and sells or rents these technologies to customers on a pay-as-you-go basis. Many businesses see public cloud as a viable way to augment or replace their own data centers.

AWS pioneered this market starting in 2006. Microsoft, now seen as an up-and-coming number two player, jumped in about four years later with Azure. Google is now playing catch up and trying to attract businesses in an effort led by executive vice president Diane Greene.

For more on Google, watch:

The thing is that it’s still hard for many people to see Google prioritizing cloud over its other efforts. Greene, the former chief executive at VMware (VMW) has been making a public effort, and Pichai offers positive remarks on earnings calls. Pichai and Alphabet chairman Eric Schmidt talked at a cloud event last year, but there hasn’t been a ton of specific details, and very little in the way of cloud talk from the co-founders

For those who say Amazon CEO and founder Jeff Bezos is similarly hands-off when it comes to his company’s cloud business, remember: he once made the trek to Amazon’s annual cloud developer conference in Las Vegas in 2012 (but not since), and he has stressed AWS’s earnings potential.

Are Google co-founders Sergey Brin and Larry Page similarly engaged with Google Cloud? Unclear.

Note: This story was updated to include a fuller definition of what constitutes Google’s “other revenue.”

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Barb Darrow
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