A Deutsche Bank note to clients said that Google Cloud could report compound annual growth of 55% between 2018 and 2022, and reach annual sales of about $38 billion by 2025. IBM posted cloud revenue of $19.2 billion in 2018. Its market value is more than $125 billion.
"While we have yet to see F500 enterprises really embrace Google Cloud, over the last six months we've become increasingly impressed with the changes made under new CEO Tom Kurian, namely the quality and number of leadership hires and the partnerships with the likes of SAP and VMware," the report said.
In light of their more confident out look in Google Cloud, the analysts also raised their target price to $1,600, up from $1,475.
"In short, while Google Cloud has been lagging behind in the market and burning money historically, with increased confidence in the go-to-market and commercial traction under Mr. Kurian, we think it can grow market share and become a material contributor to Alphabet's EBIT growth over the next few years," the report said.
Earlier this month, Alphabet announced that it was investing 3 billion euros ($3.3 billion) to expand its data centers in Europe over the next two years and "reskill the workforce for the new digital economy." The announcement came seven months after Google said it would invest $13 billion in the U.S. on data centers and offices in 2019.
Shares of Alphabet were off slightly to $1,176.17.
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