Google-parent Alphabet’s breakout cloud sales in the July-September quarter bode well for top cloud providers Microsoft and Amazon.com, and signal that market for AI-aided computing power is only growing.
The company’s stock rose 5.5 per cent in premarket trading on Wednesday, a day after Alphabet posted a 35 per cent surge in Google Cloud revenue, the fastest pace of growth in eight quarters. Analysts expected a 29 per cent rise, according to LSEG.
The company’s mainstay ad sales business rose 10 per cent.
“When you see (Microsoft, Amazon) report this week, Google is probably going to have the most impressive cloud growth numbers out there,” said Angelo Zino, senior equity analyst at CFRA Research. “It’s probably going be the best of the three this quarter.”
Google’s cloud business is much smaller than the other two, and accounted for 13 per cent of its total third-quarter sales. A year earlier, it accounted for 11 per cent.
For Amazon, its cloud business AWS accounted for 18 per cent of its revenue in the April-June quarter and Microsoft’s Intelligent Cloud unit that houses Azure contributed 44 per cent to overall revenue.
“The continued growth of the Google Cloud business this quarter clearly reflects the company’s capabilities in AI being recognized as a key driver in organizations choosing to work with Google,” said Bob O’Donnell, president and chief analyst at TECHnalysis Research.
This is the fourth straight quarter of growth reaccelerating in Google Cloud. The pace of growth had slowed for several quarters until the third quarter of 2023, which Alphabet at the time blaming “customer optimization efforts.”
While Google Cloud has less AI capacity than its peers, the company’s focus on its powerful Tensor Processing Units – its custom chip for AI – and improved security has helped it differentiate itself from Azure and AWS, helping attract customers,
