Google Cloud's growth showed slight acceleration again, as parent-company Alphabet reported cloud revenue of $3.4 billion in the third quarter, a 45% increase year-over-year. Last quarter, the unit reported only 43% growth from the previous year, which had been down from 52% growth in Q1.
Alphabet's stock surged about 8% after hours on Thursday, reporting total revenue of $46.2 billion. Google CFO Ruth Porat said that growth was driven by "continued strength in Google Cloud," in addition to increase in advertiser spend on Search and YouTube, as well as growth in Google Play. The company plans to invest in Google Cloud's sales, engineering organizations, and more to support sustainable growth, Porat says.
"There appears to be an acceleration in digital transformation that underscores the importance of the products and services that we provide," Porat said on the earnings call. "An obvious example is Cloud. We do intend to maintain a high level of investment given the opportunity we see."
Three trends have driven momentum for Google Cloud, Google CEO Sundar Pichai said on the call. There's increasing need for data analytics and artificial intelligence, customers are moving to the cloud to lower IT costs, and customers are looking for software to help them collaborate remotely.
Google Cloud's "strength in multicloud is an advantage here," Pichai said on the call.
While Google Cloud has lagged behind rivals Amazon Web Services and Microsoft in attracting large business customers, it's been investing in various strategies, such as making its cloud easier to use with multiple clouds, building solutions for specific industries like retail, being flexible in customer negotiations, and beefing up its leadership team.
It's also been working on building and developing partnerships – something that's been key to Microsoft's success. Google Cloud has said it aims to have partners involved in 100% of its new deals.
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