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Google Cloud, Google Sales, Made For Strong Alphabet Q1

Google CEO Sundar Pichai says Alphabet's cloud business enjoyed the highest growth in headcount and capital expense of all Alphabet's businesses and is providing the kind of 'heavy lifting' needed to help meet enterprise IT requirements.

Strong ad sales and growth of its cloud business drove a big increase in first fiscal quarter 2017 sales and profits for Alphabet, the parent company of Google.

The biggest part of that growth came from revenue from Google properties, which were much higher and had a higher growth rate than revenue from Google Network Members' properties, the company said Thursday during its first fiscal quarter 2017 financial analyst call.

Revenue from Google properties reached $17.4 billion, up 21.5 percent over last year. That far exceeded Google Network Members' properties revenue of $4.0 billion, which rose 8.6 percent over last year.

Alphabet reported revenue for its first fiscal quarter 2017, which ended March 31, of $24.8 billion, up about 24 percent from the $20.3 billion the company reported for the first fiscal quarter 2016. The U.S. market counted for $11.8 billion of the total revenue, with that revenue up 25 percent over last year.

[Related: Google CEO: Cloud Had A Breakout Year In 2016]

GAAP income from the quarter was reported at $5.4 billion, or $7.85 per share, up from the $4.2 billion, or $6.12 per share, the company reported for the same period of last year. Analysts had been expecting about $24.2 billion in revenue and earnings of $7.40 per share.

Google CEO Sundar Pichai (pictured) said on the call with financial analysts that Google is increasingly being asked to partner for mission-critical projects and full migrations, including moving data from on-premise data centers to the cloud.

Pichai, in response to an analyst's question about Google's channel strategy, replied that Alphabet's cloud business enjoyed the highest growth in headcount and capital expense of all Alphabet's businesses, and that it is now providing the kind of "heavy lifting" needed to help meet enterprise IT requirements.

The arrival of Diane Greene, senior vice president of Google Cloud, has helped build world-class sales, marketing and engineering teams, Pichai said.

"The heavy lifting, I would say, is around how we meet enterprises in the market," he said. "We reorganized so we have one face to the customer," he said. "So it's not just sales reps. We've been thoughtful about how we build out the entire go-to-market organization."

The company's approach to the market is to be one Google, Pichai said. "When a customer signs up for Google Cloud, they get more than just GCP [Google Cloud Platform] and G Suite," he said. "They have access to the ads and the analytics teams, YouTube teams, and resources in our organization."


"We are seeing a meaningful shift, and this momentum is resulting in a fast-growing business," Pichai said.

The growth of Google Cloud, and its signing of marquee customers like eBay, are good signs for the business going forward, Pichai said.

"In general, I think this is a very strong recognition that we have become a deep enterprise company. … Customers see us as best-in-class already," he said.

Google Cloud did well for Alphabet, said Ruth Porat, Alphabet and Google chief financial officer.

"Google Cloud continues to drive sizable growth, with Google Cloud Platform remaining one of the fastest-growing businesses across Alphabet," Porat said during the conference call.

Neither Porat nor Pichai provided specific revenue or earnings numbers for the Google Cloud.

Investors loved Alphabet's report, and showed it by driving the company's share prices into record territory, up about 4.5 percent to nearly $930 per share, in after-hours trading.

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