Updated from July 24 with additional information.
Alphabet's (GOOGL) - Get Report Google Cloud Platform faced a tough challenge after Microsoft Corp.'s (MSFT) - Get Report Azure nearly doubled its cloud revenue in the second quarter. A report from market leader Amazon.com Inc. (AMZN) - Get Report comes later this week.
Google reported its latest numbers after the market close on Monday showing that its "other revenues" reporting line, which includes Google Cloud Platform, Pixel smartphones and Play app store, grew 42% to $3.09 billion. In the first quarter, Google reported the category grew 49% to $3.1 billion.
On the second-quarter earnings call, CEO Sundar Pichai said that that Google Cloud Platform "continues to experience impressive growth across products, sectors and geographies" and noted that the number of new cloud leads worth at least half-a-million dollars tripled compared to the year-ago quarter. He also pointed to an expansion in the second quarter of a partnership with SAP (SAP) - Get Report and a new one with Nutanix (NTNX) - Get Report to integrate their offerings with Google Cloud Platform.
"We see differentiated strengths in machine learning, data analytics, security, and reliability," Pichai said of Google Cloud Platform's competitive position against rivals such as Amazon Web Services and Microsoft Azure.
As cloud rival Microsoft reorganized its sales staff to focus on Azure, Google has bolstered its cloud staff. CFO Ruth Porat said that Google Cloud Platform had the biggest increase to headcount of Alphabet's businesses during the quarter.
Porat and Pichai have given bullish, but somewhat vague, data about Google Cloud Platform's growth. The executives said in the Alphabet's first-quarter report in late April that Google Cloud Platform is one of the company's fastest-growing businesses without giving numbers for the unit.
Microsoft reported blow-out cloud growth Thursday. Microsoft boss Satya Nadella said Azure's revenue grew 97% in its fiscal fourth quarter, but did not specify a dollar amount for cloud computing sales. Azure is part of Microsoft's Intelligent Cloud division, which reported an 11% increase in sales to $7.4 billion for the quarter.
Nadella has been gunning for a bigger share of the cloud market by retooling the company's cloud sales staff through a reorganization earlier this month.
Only Amazon, which reports earnings on Thursday, breaks out its cloud numbers completely. KeyBank analyst Edward Yruma expects AWS revenue to grow more than 10% and to exceed $4 billion in the second quarter. "Competition with Microsoft and Google has increased, but does not appear to be derailing AWS's strong cloud growth prospects," Yruma wrote.
Amazon.com Inc.'s Amazon Web Services was the clear leader at the end of the first quarter, with 44% of the market for public cloud services, according to Synergy Research Group. Microsoft was second with 11%, Google Cloud Platform followed with 6%, Alibaba Group Holding Ltd. (BABA) - Get Report notched 5% of the market and IBM Corp. (IBM) - Get Report had 4%.
IBM said last Wednesday that its cloud revenues increased 17%, adjusted for currency, to $3.9 billion. The growth is meager compared to results from Amazon and Microsoft. Moreover, IBM packages software-as-a-service revenues along with cloud sales, making it difficult to gauge its progress against Amazon, Microsoft and others.
While Google Cloud Platform trails Amazon Web Services and Microsoft Azure, the business uses its parent company's prowess in data crunching to market its products. Monday's report from Alphabet may indicate whether Microsoft's growth represents a competitor stealing cloud business from its rivals, or reflects a rising tide that lifts all of the cloud providers.
Alphabet shares fell 2.7%, or $27, to $971.60 on Tuesday morning.
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