Google third-quarter results highlight public cloud goals

Alphabet, the parent company of Google, has posted third-quarter revenue of $46.2bn, while the Google Cloud business grew revenue by 45% to $3.4bn.

Sundar Pichai, chief executive officer of Alphabet and Google, said: “It’s a testament to the deep investments we’ve made in AI and other technologies, to deliver services that people turn to for help, in moments big and small.”

In a transcript of the earnings call, posted on the Seeking Alpha financial blogging site, Pichai discussed the opportunities for Google Cloud. He said: “Three trends are driving the continued momentum of cloud business. First, as the shift to digital accelerates, Google Cloud continues to provide a foundation for data processing and analytics, one of the fastest-growing segments of the market. BigQuery, which provides real-time and predictive analytics, is winning retailers like Best Buy, helping them create better experiences for shoppers.”

Pichai sees multicloud deployments as the second growth opportunity for Google Cloud. He said: “Customers are increasingly moving to the cloud to drive efficiencies and lower IT costs. Strength in multicloud is an advantage here.”

The third growth area is the new work environment arising from the coronavirus crisis. Pichai added: “Customers are looking to support hybrid work environments. We’re seeing significant growth in demand.”

The company has broken out the Google Cloud revenue as it focuses to make it into a viable alternative to the other established cloud providers, such as Amazon Web Services (AWS) and Microsoft Azure. CFO Ruth Porat said: “We are investing aggressively in cloud, given the opportunity that we see. And frankly, the fact that we were later relative to our peers was encouraging.”

Porat said Google had been “very encouraged” by the pace of customer wins, and said the company had reported very strong revenue growth in both GCP and workspace. “We do intend to maintain a high level of investment to best position ourselves,” she added.

Commenting on the overall results, Martin Garner, chief operating officer at CCS Insight, said: “Alphabet showed that the dip it suffered in Q2 was a one-off, and it posted strong growth in Q3 as digital advertising spend recovered well. More and more companies have turned to online advertising and shopping as they try to get their business back to near normal trading. So Google Search and YouTube both had solid quarters, with growth moving back towards pre-Covid-19 levels.

“Google Cloud had another very good quarter, still the fastest-growing part of the company and rising 45% over the year, as larger numbers of companies moved their work to cloud services, enabling their staff to work remotely and helping to lower their computing costs.”

Google’s overall goal for its cloud business is to offer an alternative to AWS and Azure, which dominate the public cloud market.

John Dinsdale, chief analyst at Synergy Research Group, said: “The companies competing for a share of the market have settled into three camps. Amazon and Microsoft are in a league of their own, while others are either aggressively seeking to grow their position in the market or are more focused on specific services, geographies or customer groupings.”

According to Synergy Research Group, Google, Alibaba and Tencent are all growing more rapidly than the overall market and are gaining market share.