Search
Homepage Rankings and Research Companies Channelcast Marketing Matters CRNtv Events WOTC Jobs HPE Zone Masergy Zenith Partner Program Newsroom Intel Partner Connect Digital Newsroom Dell Technologies Newsroom IBM Newsroom Juniper Newsroom The IoT Integrator NetApp Data Fabric Intel Tech Provider Zone

Alphabet Earnings: Google Cloud Run Rate Exceeds $10B

'We are really pleased with the momentum we are seeing in cloud,' Alphabet and Google CEO Sundar Pichai says. 'Year on year, the number of deals over $50 million more than doubled.'

Google Cloud’s fourth-quarter results translate into a nearly $10.5 billion annual revenue run rate for the No. 3 cloud provider, according to new, expanded financial results released by parent company Alphabet Inc. today.

The Mountain View, Calif.-based Alphabet for the first time disclosed Google Cloud – which includes Google Cloud Platform (GCP) and the G Suite collaboration and productivity tools including Gmail, Hangouts, Calendar, Currents (formerly Google+) and Docs -- and YouTube as separate line items in its publicly released earnings for the fourth quarter that ended Dec. 31. The move was made “to give greater insight into our business,” Alphabet and Google CEO Sundar Pichai said.

“We are really pleased with the momentum we are seeing in cloud,” Pichai said. “Year on year, the number of deals over $50 million more than doubled.”

Google has been investing aggressively in its cloud business. Back in July, Pichai had disclosed that Google Cloud’s annual revenue run rate had exceeded $8 billion and was the third largest driver of Alphabet’s growth. That was double the rate reported by Google in early 2018, when it cited a revenue run rate of $1 billion per quarter or $4 billion per year.

By comparison, Amazon Web Services – the largest public cloud provider – last week reported $9.95 billion in quarterly revenue, putting AWS on track for an annual revenue run rate approaching $40 billion. Meanwhile, revenue for Microsoft’s intelligent cloud segment, which includes its Azure public cloud, jumped 26.5 percent from the same period a year earlier to $11.87 billion for the quarter ended Dec. 31.

Google Cloud revenue climbed to $2.614 billion in the fourth quarter, up 53 percent from the $1.709 billion it recorded for the same quarter of 2018, driven by significant growth at GCP and ongoing strong growth at G Suite, according to Alphabet chief financial officer Ruth Porat. Total annual revenue for Google Cloud has more than doubled since 2017, moving from $4.056 billion to $5.838 billion last year and then increasing nearly 53 percent to $8.918 billion for 2019.

“The growth rate of GCP was meaningfully higher than that of cloud overall,” Porat said of the fourth-quarter results. “GCP growth was led by our infrastructure offerings and our data and analytics platform. We also saw strong uptake of our multi-cloud Anthos offering in both seat count and average revenue per seat.”

Alphabet is very pleased with GCP's growth trajectory, which it sees in customer momentum and the growing size of its average contracts in addition to revenue, Porat said.

“The traction we're having with large customers who are making multi-year commitments with us is reflected in our backlog, which ended the year at $11.4 billion, substantially all of which relates to Google Cloud,” Porat said. “Given our position as a challenger, we're investing aggressively, focused on building out our go-to-market capabilities, executing against our product roadmap and extending the global footprint of our infrastructure focused on 21 markets and six industries.”

Google Cloud, under new CEO Thomas Kurian, last year said it would triple its sales force over the new few years as it focuses on an enterprise push targeting the public sector, financial services, retail, healthcare, manufacturing, and gaming, media and telco.

Google’s investments in its cloud’s go-to-market expansion are resulting in customer momentum, Pichai said, noting customers including Wayfair, Lowe’s, Lufthansa and the U.S. Postal Service. Google Cloud also recently signed a 10-year agreement with Sabre to help the travel technology company improve operations and develop new airline and hospitality services.

Alphabet’s employee count grew by 4,803 from the third quarter, and the majority of new hires were engineers and product managers.

“The most sizable headcount increases were again in Google Cloud for both technical and sales roles, including the impact of the Looker acquisition, which closed in December,” Porat said.

In addition to Google Cloud, Alphabet’s overall results were fueled by ongoing strength in search and YouTube, and offset by a decline in hardware revenues. Alphabet reported total net income of $10.671 billion for the quarter ended or $15.35 per share, up from $8.948 billion or $12.77 in the fourth quarter of 2018. Its total revenue increased 17 percent to $46.075 fourth quarter of 2019 from the same quarter a year ago.

Alphabet beat Wall Street estimates of $12.49 per share for its earnings, but fell short of analysts’ estimates for revenue of $46.94 billion.

YouTube now has more than 20 million music and premium paid subscribers, and 2 million-plus YouTube TV paid subscribers. YouTube advertising revenue moved to $4.717 billion from the quarter, up from the year-ago figure of $3.605 billion, for full-year growth of 15 percent to $15.149 billion.

“People can now easily buy products in YouTube's home feed and search results, making it possible for advertisers to reach even more audiences,” Pichai said. “Try searching for 'Puma shoes review' on YouTube to see an example. With all the related content on YouTube like unboxing and beauty videos, this is a format people love, and it delivers a simple in-video buying experience.”

Pichai, who added the title of Alphabet CEO to his Google CEO duties in December, gave analysts some of his early thoughts on managing Alphabet

“We will always take a long-term view, investing in deep computer science and technology,” Pichai said. “Important trends like the wider adoption and application of artificial intelligence (AI), ambient computing and the move to the cloud underline our investments across Google and our other Alphabet companies.”

Healthcare is a great example of how Alphabet’s investments in those areas allows it to deliver solutions across an entire sector, according to Pichai. The Alphabet structure allows the company to have a portfolio of different businesses with different time horizons, without trying to stretch a single management team across different areas, he said.

“Google Cloud works with hospitals and healthcare providers to securely manage their patients' data -- data that is much more secure in the cloud than in paper reports or on premises,” he said. “Our AI teams at Google also work with partners to apply AI to help them and their patients, whether it's developing better health systems or helping with the diagnosis and detection of disease. Our other bets -- Verily (Life Sciences) and Calico -- are also partnering with industry leaders to use AI and cloud technologies to improve clinical trials, research and drug development.”

Google will focus on four key areas in 2020, according to Pichai: creating the most helpful products for customers, providing the most trusted experiences for its users, executing at scale and creating sustainable value. Executing at scale will show up as more seamless products across various surfaces and platforms such as Google Assistant, deeper partnerships and better use of the company’s shared infrastructure, he said.

“For example, Activision Blizzard recently chose Google as a strategic partner, using Google Cloud computing infrastructure, YouTube for live streaming and our AI tools,” Pichai said. “Putting together these multi-product partnerships helps us unlock great opportunities for our partners.”

Alphabet stock, which was up 3.48 percent to $1,482 per share when the market closed, was down 4.56 percent to $1,415 in after-hours trading at press time.

“Based on the strength of the U.S. dollar today, relative to the first quarter of last year, we expect continued FX (foreign exchange market) headwinds again in the first quarter of 2020,” Porat said.

Back to Top

Video

 

sponsored resources