Google cloud revenue boosted parent company Alphabet’s latest fiscal quarter. However, while the tech giant beat Wall Street’s earnings estimates, it fell short on revenue estimates, which sent Alphabet stock tumbling in after-hours trading on Thursday and well into Friday.
Alphabet’s revenues hit $33.7 billion for the third quarter of 2018, up 21 percent versus the third quarter of 2017. Analysts, however, expected $34.04 billion.
Google’s major cloud competitors Amazon Web Services (AWS) and Microsoft this week posted their latest quarterly results that showed a slight dip in their cloud businesses this quarter, according to data from Synergy Research Group.
Amazon’s report saw its cloud business revenue grow 46 percent, which CFO Brian Olsavsky admitted “is slightly down.” And while Microsoft’s commercial cloud revenues increased 47 percent year over year to $8.5 billion, it was down from the 53 percent year-over-year surge it witnessed in the previous quarter.
Alphabet doesn’t report cloud revenue as a separate segment but instead classified it as “Google other revenue.” This segment was up 29 percent year over year to $4.6 billion, fueled by cloud and Google Play growth.
Google CEO Sundar Pichai said the company’s banking on its investment in machine learning and its commitment to open infrastructure to drive further growth among enterprise cloud customers.
“We’re very aligned with where the market is headed in the long run,” Pichai said, according to an earnings call transcript. “And this notion of supporting open architecture so that enterprises don’t feel locked in and allowing for a multi-cloud environment to develop. That’s the direction we are betting on and our indications are that the market is headed in that direction as well.”
On-Prem Cloud Still Big
While Google increased its cloud market share during the third quarter to 7 percent, it still lags far behind the top two vendors AWS (34 percent) and Microsoft Azure (14 percent), according to Synergy Research. And it’s worth nothing that both Amazon and Microsoft have a similar multi-cloud approach. Amazon has its AWS public cloud and on-premises hybrid cloud partnership with VMware while Microsoft has its Azure public cloud and Azure Stack on-premises products.
When asked about Google’s on-premises strategy, Pichai said the company is “thoughtfully looking at it,” and cited its partnerships with SAP, Pivotal, and VMware. Google also has a hybrid-cloud product with Cisco and its own Kubernetes-based GKE On Prem available to early access customers.
On-premises data centers remain “a big, big requirement for customers,” and these partnerships help Google address those companies’ needs, Pichai said. When it comes to hybrid cloud, “we are thinking about how to do that better,” Pichai said. “Our overall approach to cloud hybrid modernization I think is the right long-term direction and so we are doing that.”
