While Google reported a "significant" slowdown in ad growth during its Q1 earnings on Tuesday, its cloud business continues to hum along.
Google Cloud generated $2.78 billion in revenue this quarter, up 52% from the same time one year ago, the company said. That's in-line with last quarter, when it reported $2.6 billion in revenue, which was a 53% increase year-over-year. With these numbers, Google appears on track to rake in $10 billion in annual revenue, compared to an annual revenue run rate of over $8 billion last year. This is only the second time Alphabet has broken out Google Cloud-specific revenue during earnings.
In the year-plus since Thomas Kurian took the role of Cloud CEO in January 2019, the unit has announced plans to triple its salesforce over the next few years and build partnerships as it competes with Amazon Web Services and Microsoft for major enterprise customers like banks and telecom companies. Kurian has said that customer deals worth over $50 million more than doubled last year.
Already, Google Cloud has made some internal changes, such as changing how it pays its salespeople and creating new positions specifically for going after top global organizations. And a Flexera report of 750 professionals recently found Google Cloud to be the fastest growing cloud among enterprises.
Analysts have said they expect demand for the cloud to grow as remote work explodes and come out of the coronavirus crisis in even better shape, even as many other companies take a hit. Some even said they could use this time to look into possible acquisitions. Just February, Google Cloud closed its $2.4 billion acquisition of the data analytics company Looker.
However, analysts say that cloud providers may face challenges in infrastructure strain and deal flow as salespeople can no longer meet with clients face-to-face. This could be a challenge for Google Cloud as making deals with new enterprise customers is crucial for it to catch up to Microsoft and AWS.
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