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Google on a Buying Spree: Flexes Muscle Against AMZN & MSFT

Shilpa Mete
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Alphabet’s GOOGL Google division is leaving no stone unturned to bolster its cloud business. The company is sharpening its competitive edge against Amazon’s AMZN AWS and Microsoft’s MSFT Azure through strategic acquisitions and partnerships.

Reportedly, Google has acquired Cask Data, a solution developer for big data analytics based on Hadoop. CDAP is an open source platform that helps enterprise customers to manage big data seamlessly by building and running big data solutions. The latest acquisition will enable Google to improve the productivity of cloud customers by offering data processing services.

Recently, Google also announced the buyout of Velostrata, a provider of enterprise cloud migration technology. This technology will help customers of Google Cloud migrate their database, enterprise applications and large batch processing to cloud seamlessly.


Alphabet Inc. Price, Consensus and EPS Surprise


Alphabet Inc. Price, Consensus and EPS Surprise | Alphabet Inc. Quote


Google’s Market Share Improving

Notably, apart from Microsoft Azure, Google was the only cloud provider that gained market share in first-quarter 2018. According to data from Synergy Research Group, Google cloud accounted for 6% of the market share, which increased from 5% in the year-ago quarter.

Alphabet’s “Google other revenues” category, which is comprises the Google Play Store, Google Cloud offerings, and its hardware initiatives, surged 35% to $4.35 billion in the recently concluded first quarter. This was primarily driven by the cloud business of the company. Notably, Google Cloud now generates more than $1 billion of sales per quarter.

Google’s cloud clientele continues to expand with the additions of Shopify SHOP, CSRA, HubSpot, Box and Nutanix. Additionally, in order to attract more customers to the platform, Google has launched a partnership program.

However, due to its late entry in the market, Google is trailing AWS and Azure.

Per Synergy’s report, Microsoft Azure grabbed market share of 13% in the first quarter, up from 10% in the year-ago period. The company is gaining traction in the market due to a significant increase in customer base. In the last reported quarter, revenues soared 89% at constant currency on a year-over-year basis. Strong adoption of its Office 365 suite is also anticipated to boost Azure’s top-line growth, going ahead.

AWS’ market share in the period remains unchanged at 33%. AWS is performing well in terms of revenues and client base. Recently, it acquired several clients like Verizon, Ryanair and Oath. Amazon’s revenues increased 48.6% year over year, courtesy of AWS in the first quarter.
However, it lost market share on a sequential basis.

Nevertheless, we believe Google’s expanding clientele supported by strategic acquisitions and partnership will boost competitiveness going ahead.


Alphabet Inc. Revenue (TTM)


Alphabet Inc. Revenue (TTM) | Alphabet Inc. Quote


Google Cloud Preferred, Pricing Key Catalyst

According to a recent survey (997 respondents) conducted by RightScale adoption rate for AWS, Azure and Google Cloud in 2018 is 68%, 58% and 19%, respectively. However, the percentage of respondents who are planning to select these services is 7% for AWS, 8% for Azure and 15% for Google Cloud.

We believe the company’s pricing strategy is the main support behind winning clients. Google cloud offers on-demand real time pricing while AWS provides substantial discounts but only for long-term deals and advance payments.

Moreover, strategic acquisitions like Cask Data & Velostrata are helping Google to add new features to its cloud offerings. These acquisitions will continue to strengthen the product and services portfolio of the company in the rapidly growing cloud market.

Per Markets and Markets data, cloud enterprise market is expected to reach $34.42 billion by 2022 by growing at a CAGR of 28.6% between 2017 and 2022.

Currently, Alphabet Carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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