Alphabet is pouring billions into boosting Google Cloud as it works to close the gap on AWS and Microsoft Azure, but the results have been mixed.
After reporting the cost and operating profit of Google Cloud for the first time on Tuesday, Google Cloud’s revenue grew 47% year-over-year to $3.84 billion. Google Cloud, which is comprised of Google Cloud Platform and Google Workspace, posted operating losses of $1.24 billion in the fourth quarter compared to losses of $1.19 billion in the same quarter a year ago.
Google’s cloud segment had revenues of $13.06 billion last year and an operating loss of $5.61 billion. On the earnings call, Alphabet and Google CEO Sundar Pichai said Google Cloud Platform’s growth was “meaningfully above the growth rate for cloud overall.”
“I’m very pleased with the progress here,” said Pichai said on the earnings call. “We’ll continue making disciplined investments to scale the business and improve profitability. In addition, our backlog grew to nearly $30 billion, up from $19 billion in Q3, nearly all attributable to cloud.
“We continue to invest strongly in the business, given the momentum we are seeing. These investments in our go-to-market organization have helped us win larger deals including several billion dollar deals in 2020. Deals over $250 million more than tripled in the same period.”
Google CFO Ruth Porat said Google Cloud more than doubled revenues over the last two years from $5.8 billion in 2018 to $13.1 billion in 2020.
RELATED: Google Cloud broadens its global reach with three new regions
Under the leadership of Google Cloud Platform CEO Thomas Kurian, who joined Google from Oracle in 2019, Google Cloud has expanded its sales distribution capabilities, its number of channel partners, and cloud regions.
Last year, Google Cloud launched four new cloud regions: Jakarta, Indonesia, Las Vegas, Nevada, Salt Lake City, Utah, and Seoul, South Korea. Google is targeting additional cloud regions in Doha, Qatar, Madrid, Spain, Milan, Italy, and Paris, France.
Despite all of those efforts, it has been difficult for Google Cloud to close the gap on AWS and Azure. According to Synergy Research Group, Amazon and Microsoft continued to account for over half of the worldwide market in the fourth quarter. SRG said Microsoft gained ground AWS and hit the milestone of achieving a 20% worldwide market share.
Microsoft, Google and Alibaba have steadily gained market share over the last four years, though not at the expense Amazon. Amazon’s market share has stayed in the 32-34% band throughout that four-year period. Google Cloud’s fourth quarter market was 9%, according to SRG.
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