Though Google’s (GOOG) - Get Alphabet Inc. Class C Report public cloud business still appears to be much smaller than Amazon.com (AMZN) - Get Amazon.com, Inc. Report and Microsoft’s (MSFT) - Get Microsoft Corporation (MSFT) Report, it has been steadily growing its base of major enterprise clients.
On Wednesday, Nokia (NOK) - Get Nokia Oyj Sponsored ADR Report announced that it plans to fully migrate its on-premise IT infrastructure to Google Cloud, through a 5-year deal. The Finnish telecom equipment giant added that it expects this migration to occur “over an 18- to 24-month period,” and that the deal is expected to “drive meaningful operational efficiencies and cost savings over time due to a reduction in real estate footprint, hardware energy consumption, and hardware capacity purchasing needs.”
Financial terms of the deal weren’t disclosed. However, with Nokia possessing 98,000 employees as of 2019 and generating more than $25 billion in annual revenue, it’s safe to assume that it will be making heavy use of Google’s cloud infrastructure and developer platform services in the coming years.
Given its apparent size, the Nokia deal could serve as a useful reference win as Google continues investing heavily in building up its public cloud business’ enterprise sales and customer support headcount, as well as expanding its base of reseller partners. In 2019, Alphabet CEO Sundar Pichai said that the Google Cloud segment, which covers both Google’s public cloud business and its Google Workspace (formerly G Suite) productivity app business, plans to triple its salesforce within the next few years.
Meanwhile, Thomas Kurian, who was named the head of Google Cloud in late 2018, has indicated Google has stepped up its efforts to sell C-suite execs on public cloud deals during his watch. Kurian has also outlined a strategy of pitching retail, healthcare, media/entertainment, financial services and manufacturing firms on industry-specific offerings.
Along with Nokia, prominent firms known to be using Google’s public cloud services include PayPal, Snap, Disney, Target, Home Depot, eBay, Twitter, HSBC, Netflix and Spotify. There’s also TikTok, although its recent deal with Oracle (ORCL) - Get Oracle Corporation Report puts that customer relationship in limbo.
Google’s advanced machine learning services for cloud developers have often been a draw for such clients. Other selling points include Google’s extensive fiber infrastructure (useful for companies with heavy bandwidth needs) and its popular BigQuery cloud data warehouse service, which competes against Snowflake (SNOW) - Get SNOWFLAKE, INC. Report and Amazon/Microsoft’s data warehouse offerings.
It’s worth noting, however, that many of the aforementioned Google Cloud clients also make extensive use of rival cloud platforms and/or their own data centers. Netflix and Disney, for example, are both also major Amazon Web Services (AWS) clients, and PayPal and Twitter have major internal data center infrastructures.
Still, Google does appear to have gained public cloud share in recent years off a relatively small base.
The company’s Google Cloud segment revenue rose 53% in 2019 to $8.9 billion, with Pichai stating the public cloud business grew at a “meaningfully higher” rate than Google Cloud’s overall growth rate, with growth accelerating in 2019 relative to 2018. In Q2, Google Cloud segment revenue was up 43% annually to $3 billion.
For comparison, AWS’ revenue rose 37% in 2019 to $35.03 billion, and was up 29% in Q2 to $10.8 billion. Microsoft doesn’t break out its Azure public cloud unit’s revenue -- it only breaks out Azure’s annual revenue growth, which in Microsoft’s June quarter was at 47% -- but third-party estimates have suggested Azure is now on a $15 billion-plus annual revenue run rate.