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Google to Invest EUR 1B to Expand Data Center in Netherlands

Zacks Equity Research

Alphabet Inc.’s GOOGL division, Google has been gradually expanding presence in Europe, in an effort to capitalize on the availability of vast natural and renewable resources in the northern part of the continent.

In sync with the company’s expansion strategy, it plans to expand its data center infrastructure in the Netherlands. In addition, the company plans to build a new facility in Middenmeer.

The search giant will invest EUR 1 billion ($1.1 billion) for the expansion of its data center, which is likely to be an energy efficient one, in the Netherlands.

We believe the growing number of data centers will add efficiency to Google’s business as these will provide better storage for its vast search data, emails, photos and most importantly, cloud data with advanced security.

Data Center Expansion Continues

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

Google, being no exception, is expanding data centers to meet the requirement of more data-intensive services such as Google search, Gmail, Google+, YouTube, wearables and Internet of Things (IoT).

In 2018, the search giant had invested EUR 1.5 billion in the Netherlands for data center operations. The latest expansion brings the company’s total investment in the country to EUR 2.5 billion.

Google intends to leverage abundant green energy and renewable energy production in the Netherlands. This green initiative will help minimize its carbon footprint and lead to cost benefits. Cheap electricity generation from renewable sources and Google’s robust machine learning techniques will aid the cost optimization strategy.

Alphabet Inc. Price and Consensus

 

Alphabet Inc. Price and Consensus

Alphabet Inc. price-consensus-chart | Alphabet Inc. Quote

Growth Opportunity

Per a report from Research and Markets, the global data-center storage market is expected to grow by $107.44 billion during the 2019-2023 period.

However, its expanding data center in Europe has intensified competition from the likes of Amazon, Microsoft, Apple, Facebook and Alibaba, which are also leaving no stone unturned to bolster presence in the region.

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

Zacks Rank & Key Picks

Currently, Alphabet carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Autohome Inc. ATHM, Match Group, Inc. MTCH and Marchex, Inc. MCHX, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth for Autohome, Match Group and Marchex is currently projected at 20.9%, 15.2% and 15%, respectively.

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