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Alphabet's Google Buys Land in Europe to Expand Data Centers

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Alphabet Inc. GOOGL division, Google has been gradually expanding its presence in Europe.

Alphabet’s Google has purchased 173 acres of land in the Netherlands. Though the financial details are unknown, the company plans to expand its data centers across Europe.

This is inline with the company’s initiative to extend its cloud footprint worldwide. These facilities will cater to the surge in Internet usage and demand for data-storage capacity.

Coming to price performance, Alphabet’s shares have returned 18.9% in the past 12 months, underperforming the industry’s growth of 24.7%.

Other Investments

Google already owns a data center in Eemshaven in the Netherlands. Recently, the company announced that it plans to invest an additional 500 million euros ($582.2 million) in the complex.

In addition, the search giant also bought plots of land in Denmark, Luxembourg and Sweden, and plans to further invest in its Belgian site.

The need for data-center expansion is on the rise due to growing demand for cloud computing and ever-increasing needs of Internet users.

Google, being no exception, is expanding its data center to meet the requirement of more data-intensive services such as Google search, Gmail, Google+ and YouTube. Moreover, the company’s expansion into mobile operating systems, wearables, Internet of Things (IoT) and ultra-high-speed broadband markets will require it to boost its computing power exponentially.

Growth Opportunity

The U.S. independent research firm, Gartner predicts that worldwide spending on data-center systems is expected to grow 3.7% in 2018, which is even higher than the strong 2017-end figure.

Most of the tech companies have been investing huge amounts to build more such facilities. Recently, Google said that it had spent $7.7 billion in capital expenditures, most of which went toward infrastructure to expand its cloud and artificial-intelligence efforts. Other firms, including Microsoft, have been making investments to built data centers in Europe.

We believe that Google is well positioned to take advantage of the projected growth in this segment. The expanding infrastructure will eventually boost Google’s position in the cloud computing market, which is currently dominated by the likes of Amazon and Microsoft.

Alphabet Inc. Price and Consensus


Alphabet Inc. Price and Consensus | Alphabet Inc. Quote

Zacks Rank and Other Stocks to Consider

Currently, Alphabet has a Zacks Rank #1 (Strong Buy). Other top-ranked stocks in the same industry include Groupon GRPN, PetMed Express PETS and Expedia EXPE. While Groupon sports a Zacks Rank #1, PetMed and Expedia both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Groupon, PetMed and Expedia is currently projected to be 6.5%, 10% and 14.5%, respectively.

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