Google CEO: Cloud Had A Breakout Year In 2016

Google's cloud took major strides forward in 2016, accelerating the pace at which features were rolled out, differentiating its technological capabilities and notching big customer wins, Google CEO Sundar Pichai told investors on Thursday.

Google Cloud Platform "moved well beyond table stakes," Pichai said during parent company Alphabet's Q4 earnings call. He said the cloud platform is now competing with unique offerings, especially around machine learning and analytics.

The cloud business is "on a terrific upswing," Pichai said, and "expanding our partner ecosystem continues to be a big focus." Google recently entered technology alliances with Intel, Pivotal, Slack and Red Hat, and ramped its partnership with global systems integration giant Accenture.

[Related: The Race Is On: IBM, Google, Microsoft And AWS Aim To Deliver Machine Learning As A Cloud Service]

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Google has differentiated its cloud's capabilities across four areas: data analytics and machine learning, security and privacy, tools for application development, and the ability to create connected business platforms by leveraging its acquisition of Apigee late last year.

In the fourth quarter, ended Dec. 31, the Internet giant based in Mountain View, Calif. signed several new large enterprise customers while convincing existing customers to expand their use of the platform, Pichai said.

For its G Suite application portfolio—the rebranded Google Apps Software-as-a-Service product—Google in the last quarter achieved the milestone of three million paying business customers, he said.

Ruth Porat, CFO of Alphabet, told investors the company is aggressively investing in its cloud to accelerate its progress, seeing the potential for that business to be a major revenue driver for Google over the next few years.

Alphabet took in $26.1 billion in revenue for the quarter, posting a 24 percent growth year-over-year, in constant currency.

Those sales beat investor expectations for revenue that had been set at $25.2 billion. But earnings per share of $9.36 came in lower than the $9.67 a share that Wall Street expected, according to Thomson Reuters I/B/E/S.

Alphabet shares sank in after-hour trading by about 3 percent from the market close of $856.98 a share.

The Google segment of Alphabet's business contributed $25.8 billion to the company's overall revenue, growing 22 percent year-over-year. Google saw operating income of almost $7.9 billion.

Google Cloud Platform is grouped in the company's financials into a broader category with hardware and Google Play. Those segments posted $3.4 billion in revenue in the quarter for 62 percent year-over-year growth. For the entirety of 2016, that category grew by more than 40 percent.

Cloud is among Google's "biggest bets," Pichai said, along with YouTube and its hardware business.

The CEO said machine learning is the "key trend powering Google today," improving hundreds of the vendor's products.

"Computing is moving from mobile-first to AI-first, with more universal, ambient and intelligent computing that you can interact with naturally," Pichai said. "2016 was the year that this became central to who we are as a company and the products we build."

Pichai also reported that by 2017, Google would reach a goal it set out a couple of years earlier of powering all its data centers entirely from renewable energy sources.