Google's Cloud Computing Business Shows Rapid Growth in Q2

Cloud services experienced strong growth across geographies and business sectors, company executives said in Google's second quarter 2017 earnings call on July 24.

Growing Google Cloud

Google's considerable efforts at making its cloud services offerings more enterprise ready appears to be finally paying off.

For the quarter ended June 30, the company closed three times as many deals worth $500,000 or more compared to the same period last year, CEO Sundar Pichai said in the company's second quarter earnings call July 24.

"Google Cloud Platform continued to experience impressive growth across products, sectors and geographies, and increasingly, with large customers in regulated sectors," Pichai noted.

In keeping with its usual practice, Google did not break out revenue totals for its cloud business. However, revenues for Google's non-advertising related 'other businesses', of which the cloud division is one, rose sharply from $2.1 billion in Q2 2016 to $3.1 billion during the last quarter—a nearly 47 percent jump year over year.

Pichai and Google CFO Ruth Porat pointed to the cloud business as one of the primary drivers of growth within this segment for the company in the past quarter. Google Monday reported earnings of $3.5 billion on revenues of $26.01 billion for the quarter ended June 30 compared to $4.9 billion in profit on revenues of  $21.5 billion in the same quarter in 2016.

This is the second quarter in a row that Google's top executives have highlighted the performance of the cloud business. In the first quarter, Porat described the cloud operation as one of Google's most important strategic priorities and committed to investing what it takes to grow and sustain momentum in its cloud computer business over the long-term.

Since the beginning of this fiscal year, Google's cloud operations have accounted for the largest growth in capital expenditure and headcount across all of Google. Most of the resources have gone towards building out Google's cloud engineering, marketing and sales teams.

Google has also invested in new cloud data centers and opened new cloud regions in the U.S, Australia and the United Kingdom, during the second quarter, Pichai said. 

Google also broadened an existing relationship with SAP and established a new one with Nutanix. It is currently working on integrating products from both vendors with the Google Cloud Platform. The goal of these partnerships is to give enterprise customers a way to run business workloads in hybrid environments, on-premises and in the cloud using containers and other cloud technologies, he said.

The growth in Google's cloud business comes at an opportune time for the company. A new cloud market forecast from Synergy Research Group this month pegged worldwide revenues from cloud and Software as a Service (SaaS) to grow at between 23 percent and 29 percent over the next five years. Synergy expects worldwide revenues from cloud services to top $200 billion annually in 2020.

Amazon, with its Amazon Web Services (AWS), continues to be far and away the most dominant player in the cloud space with a worldwide market share of around 33 percent, according to Synergy's numbers for the 2017 first quarter.

But Google, along with the rest of the cloud rivals chasing AWS, including Microsoft, IBM and Oracle, had a substantially higher annual growth rate of more than 80 percent. Synergy put Google among the lead providers—along with AWS and Microsoft—in the Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) segment while it had IBM as the leader in the hosted private cloud market.

Jaikumar Vijayan

Jaikumar Vijayan

Vijayan is an award-winning independent journalist and tech content creation specialist covering data security and privacy, business intelligence, big data and data analytics.