Google’s cloud business is well-positioned for growth going forward

Alphabet’s (NYSE: GOOGL) subsidiary Google makes most of its money through its search and advertisement businesses but its cloud division is no small player. This segment is a significant growth driver and is well-positioned for further expansion going forward.

In its most recent quarter, revenues from cloud increased 52% to $2.8 billion. During the pandemic period, the company provided its services to various businesses by helping them increase their connectivity, shift their operations to digital platforms as well as providing easy access to information.

This period has paved the way for a shift to remote working and this trend is very much likely to continue even after the pandemic subsides. Google Cloud and G Suite stand to benefit greatly from the increase in demand for work-from-home solutions. Google Meet, in particular, is seeing increased traction.   

In the first quarter, Google saw growth in GCP which was led by infrastructure and data and analytics. The company also saw growth in G Suite driven by higher seat count and average revenue per seat.

Over the past three years, revenues in the cloud business have increased consistently, with 2019 revenues rising 53% from the previous year. The stable growth was fueled by strong demand for GCP and G Suite offerings.

According to a report by Kinsta, worldwide spending on public cloud services and infrastructure is forecast to double over the next five years growing to almost $500 billion by 2023.

G Suite also helped healthcare workers during the health crisis by providing the necessary support and services to access medical information and other data in order to help patients in need.

“So just to add one more example, Cambridge Health Alliance is a U.S. health system with 140,000 patients. And they relied on G Suite to support their staff and caregivers during COVID-19, helping them connect across hospitals, health centers, from home.” – Ruth Porat, CFO

Alphabet had 123,048 employees as of March 31, 2020. The largest number of additions were in the cloud and search divisions, particularly on the technical side.

The company sees a long-term opportunity in cloud and is making investments in this area. The ongoing shift to ambient computing provides opportunities for further growth.

According to Eko, the trend of working remotely is one that is here to stay and the technology that supports it will see greater demand. Based on data from Gartner, around 74% of top-level executives plan to shift their employees to remote work after the pandemic subsides. This will help in cost-savings for both the companies and the employees.

In such an environment, the demand for workplace solutions that help in conducting operations, communications and meetings online will see a huge surge and this is exactly the trend that Google is well-positioned to take advantage of with GCP, G Suite and Google Meet.