Picture credit: Robert Scoble/Flickr
It was a little bit of a surprise when Google’s third quarter results came back. Even though profits were at $2.8bn (£1.7bn), it was down 5% from this time last year. Operating income was $3.72bn, down on $3.76bn in 2013, yet it now comprises less than a quarter (23%) of overall revenues, compared to 27% last year.
Consolidated revenues therefore were at $16.52bn, an increase of 20% this time last year. Nevertheless the figures caused ripples on the stock market, with shares down 2% in after hours trading.
For the execs, there isn’t even a hint of a problem. “Google had another strong performance this quarter, with revenue up 20% year on year,” said CFO Patrick Pichette in a statement. “We continue to be excited about the growth in our advertising and emerging businesses.”
No problems here at all. But the part on ‘emerging businesses’ is an interesting one. It’s not a misnomer to say that Google’s ecosystem is sprawling. From search to YouTube to cloud, it’s an impressive portfolio. Yet there was a lot of talk about enterprise cloud in the earnings call accompanying the financial results – particularly with regard to questions from analysts.
“Cloud is an area that is kind of booming right?” said Pichette, according to Seeking Alpha. “We know that the long-term trends are very clear for us, which is the vast majority of businesses. Everybody is moving their infrastructures to the cloud.
“It is an area where we have fundamentally great assets to contribute to this industry, both in terms of the flexibility, the cost structure, the technology, and that’s why we’re investing heavily in there,” he added. “We’re seeing great progress from an adoption perspective, signing up new customers.”
Pichette couldn’t give specific numbers behind the levels of traction, number of customers, CapEx, or level of investment in Google’s cloud. But there’s been a lot of promise in recent news. Earlier this month the company announced latest price cuts on its Compute Engine series, as well as offering a $100k Cloud Platform credit to eligible startups.
Despite this, the analysts aren’t exactly overwhelmed by Google’s current offering. According to Synergy Research, which studies the cloud infrastructure services market extensively, Google is off the pace in the race for second place, behind Microsoft and IBM and, of course, behind the behemoth that is Amazon Web Services.
This time last year, Amazon’s estimated revenues were larger than Salesforce, Microsoft, IBM and Google combined. 2014 sees that number dwindling, yet also sees Google’s market position dwindling, according to chief analyst John Dinsdale. He argued that Google’s lack of enterprise presence at the time counted against it.
Elsewhere, the Google cloud team announced a series of infrastructure refreshes in its Europe region. Customers get a new shiny Google Compute Engine zone, europe-west1-c, but deprecating europe-west1-a at the same time. The new zone will be launched in two weeks, while the doomed europe-west1-a will disappear on March 29 next year, giving customers plenty of time to orchestrate their exit.
What do you make of these results, and Google’s position in the premium IaaS market?