Google Cloud won’t beat AWS or Microsoft anytime soon





  • Google Cloud reported Tuesday that it generated $4.99 billion in revenue in the past quarter.
  • Google Cloud grew 45% from this time the year before, but Microsoft is seeing stronger growth.
  • Google Cloud won’t overtake Amazon or Microsoft, analysts say, so it may have to learn to coexist.

Google Cloud’s recent earnings report shows it won’t meet its near-term ambitions of at least cloud number two, analysts say, but it won’t matter in the long-term.

Forrester forecasts that Google Cloud will still lag behind its rivals Amazon Web Services and Microsoft Azure for the foreseeable future. It doesn’t see the same rate of growth as its rivals, which means embracing the existing side by side with its competition in customer environments.

Google reported Tuesday that Google Cloud generated revenue of $4.99 billion for the quarter, a 45% growth from this time last year. This fell short of analyst expectations of more than $5.07 billion. In comparison, Microsoft reported that revenue from Azure and other cloud services grew by 50% from the same time last year.

Amazon is slated to report earnings after the closing bell on Thursday, and the AWS division is expected to continue its dominant streak.

Azure has also experienced strong growth in gaining market share. According to Gartner, Google Cloud’s market share grew from 5.2% to 6.1% from 2019 to 2020. By comparison, Microsoft’s market share grew from 17.4% to 19.7%, while AWS’s shrank from 44.6% to 40.8%. Google Cloud doesn’t have the growth rate it needs to break into the number two cloud space, said Lee Sustar, chief analyst at Forrester.

“That’s not to say the growth isn’t remarkable, as it has been,” he said.

AWS will continue to grow and Microsoft can leverage its strong presence with large enterprise customers. Google Cloud won’t be number two anytime soon, but it doesn’t matter because Google will find its cloud business profitable and valuable in the long run, Sustar says.

“They may not make the top two, but they’re not going away,” said Sustar. “AWS’s early lead is significant and still hard to overcome.”

Google Cloud is still losing money investing in sales and product development as it reported a loss of $644 million this quarter. The cloud provider may face growing pains as it takes on new leadership, gains market share and increases the perception of its products, said Dan Morgan, senior trust portfolio manager at Synovus.

While Google Cloud improved a loss of $1.21 billion this time around last year, it’s disappointing given that AWS is very profitable for the company overall, Morgan said.

In addition, the market for cloud services is changing. Demand from companies moving to the cloud increased during the pandemic, but growth may have stopped, according to Sustar.

Google Cloud may be able to overtake rivals with a major acquisition, but this isn’t likely due to regulatory hurdles, Sustar said. Still, Google Cloud is gaining momentum as it brings in customers like Ikea, General Mills, and GE. It is in the process of making itself more flexible in negotiating sales contracts and making its technology work with other clouds.

While Google Cloud may have some benefits in helping customers move to the cloud, companies usually take a “yes and approach,” Sustar said. Businesses can use multiple clouds to avoid putting all their eggs in one basket.

Google is taking a multi-cloud approach because its cloud competition is leading the way. Since AWS was the first to start the game, many companies have already moved core IT infrastructure to the cloud. In addition, many large companies already use Microsoft software and operating systems, such as Office and Windows, so they can easily migrate to Azure.

Google Cloud “may have to settle for coexistence so they don’t have to make the top one or two,” Sustar said.

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