Sundar Pichai, CEO of Alphabet and Google wrote in November 2015: “All of Google’s own businesses run on our cloud infrastructure. Including our own services, Google has significantly larger data center capacity than any other public cloud provider – part of what makes it possible for customers to receive the best price and performance for compute and storage services.”
“All of this demonstrates great momentum, but it’s just the beginning,” Pichai added. “In fact, only a tiny fraction of the world’s data is currently in the cloud – most businesses and applications aren’t cloud-based yet. This is an important and fast-growing area for Google and we’re investing for the future.”
Google Cloud (GOOG, GOOGL) has made steady progress since then. Here are six things to know about Google Cloud.
1. Market Share
Over the past few years, Google has worked to gradually increase its share in the market. Today, Google Cloud ranks third after dominant players like Amazon (AMZN) AWS and Microsoft (MSFT) Azure. Google Cloud dominates close to 10% of the market share (IaaS, PaaS, Hosted Private Cloud) and has outpaced overall market growth to gain market share. In 2021, Google positioned itself as a leader in the Gartner Magic Quadrant for Cloud Infrastructure and Platform Services for the fourth consecutive year. The worldwide public cloud market size is projected to be $474 billion in 2022, up from $408 billion in 2021. Over the next few years, Gartner estimates that the “cloud revenue will surpass non-cloud revenue for relevant enterprise IT markets.”
Alphabet began disclosing revenue from Google Cloud business in 2020 while reporting the fiscal year (FY) 2019 numbers along with Google Services and Other Bets. Google Cloud generates revenues from fees received for Google Cloud Platform services, Google Workspace collaboration tools and other enterprise services. During FY 2021, Alphabet’s cloud business reported a profit of $19.21 billion, an increase of 47.09% over the previous fiscal’s revenue. During FY2017, FY2018 and FY2019, Google Cloud reported a revenue of $4.06 billion, $5.84 billion and $8.92 billion, respectively. During the Q4 FY2021 earnings call in February 2022, Sundar Pichai said, “For the full year 2021 compared with the full year 2020, we saw over 80% growth in total deal volume for Google Cloud Platform, and over 65% growth in the number of deals over a billion dollars.”
“Our business environment changes rapidly and needs long-term investment,” reads Google founders’ IPO letter in 2004. “We will not hesitate to place major bets on promising new opportunities. We will not shy away from high-risk, high-reward projects because of short-term earnings pressure.”
Over these years, the company may have a new name, but its core philosophy has remained the same, and it continues to allocate a significant part of its revenue towards its R&D initiatives. Alphabet spent $31.56 billion on R&D in 2021, higher than $27.58 billion in 2020. The company continues to hire talent, mainly for its cloud arm — something that the company has acknowledged in its earnings reports. In 2021, Google LLC was granted 1,493 patents.
Back in 2017, Alphabet CFO Ruth Porat spoke at a conference, where she said, “The acquisitions that we’ve talked about really in particular fill in holes in cloud and that’s been really valuable.”
Google Cloud began the year 2022 by acquiring Siemplify, a leading security orchestration, automation and response (SOAR) provider to strengthen the cybersecurity of its cloud ecosystem. This was followed by the $5.4 billion acquisition announcement of Mandiant (MNDT) in March. The acquisition of Mandiant underscores Google Cloud’s commitment to advancing its security offerings.
5. Customers & Partners
The technology giant has some of the best-known enterprises on its list of customers—The Home Depot (HD), PayPal (PYPL), Twitter (TWTR), Airbus, UPS, Cardinal Health (CAH), Colgate-Palmolive Allianz, Equifax, 20th Century Fox, Commonwealth of Massachusetts, the Defense Innovation Unit, USDA, LVMH, Albertsons and Spotify among others.
At the Google Data Cloud Summit on April 6, 2022, Google Cloud announced the Data Cloud Alliance with Accenture, Confluent, Databricks, Dataiku, Deloitte, Elastic, Fivetran, MongoDB, Neo4j, Redis and Starburst as its founding members. The alliance is committed to “make data more portable and accessible across disparate business systems, platforms, and environments—with a goal of ensuring that access to data is never a barrier to digital transformation.” In addition, Boeing has recently entered a partnership with Google Cloud to support Boeing’s cloud transformation by migrating hundreds of applications across multiple business groups and aerospace products to cloud.
6. Clean Cloud
“Tackling climate change requires rapidly transitioning the entire global economy to clean energy and Google Cloud will be at the forefront of this transition,” said Urs Hölzle, SVP of Cloud Infrastructure.
Currently, Google cloud is the ‘cleanest’ cloud in the industry. However, the company has set an ambitious target in 2020 “to run our business on carbon-free energy everywhere, at all times, by 2030.” This means that even data centers would operate on carbon-free energy.
Diane Greene joined as CEO of Google Cloud in 2015. Thomas Kurian joined Google Cloud in 2018 and transitioned into the leadership role since January 2019.
Disclaimer: Alphabet Fiscal Year (FY) is January to December. The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration. The report has been carefully prepared, and any exclusions or errors in it are totally unintentional. Information based on mentioned reports.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.