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Google Leverages its Partner Program for Cloud

Posted on Wednesday, Nov 4th 2020

Last week, Google (Nasdaq: GOOG) announced its third quarter results that continued to surpass market expectations. While Google continues to invest in search improvements, it is seeing strong traction in its Cloud offerings.

Alphabet’s Financials

Alphabet’s third quarter net revenues dropped 14% to $46.2 billion, ahead of the market’s forecast of $42.9 billion. Net income went up to $11.2 billion. Adjusted earnings of $16.40 per share were higher than the market’s forecast of $11.29 per share.

By segment, Google Properties revenue grew 9.91% to $31.38 billion. Google Other revenue — which consist of YouTube non-advertising revenue — grew to $5.48 billion. Overall search revenue excluding TAC was $38.01 billion compared with the market’s expectations of $35.3 billion. Cloud revenue was $3.44 billion compared with $3.31 billion expected by the market. Revenue from Other Bets grew from $155 million a year ago to $178 million.

Google did not provide an outlook for the current quarter.

Alphabet’s Search Enhancements

Recently, Google announced several new features for its search engine. The advancements include a new spelling system, a new approach to identifying key moments and videos, and the ability to identify a song based on people humming tunes to search.

It continued to deploy advanced algorithms to improve the results for English search queries. It invested in improving the shopping experience in search to allow people to find the best products and prices from a wide range of merchants. Users can also know if they’re getting a good deal by looking at the recently added price comparisons and leverage other features such as price tracking to get alerts if a discount on a product is available.

Besides helping consumers make smart decisions about purchases, Google is also helping merchants and advertisers accelerate sales. It allowed merchants to list products for free on its shopping tab in 48 countries. It also announced a new insights page on Google ads for advertisers to help businesses better understand consumer trends and track current search demand for products for services.

Google’s Cloud Growth

Within the Cloud, Google is seeing a few key trends driving growth in the business. First, businesses are looking for advanced data processing and analytics. BigQuery has become one of the fastest-growing segments within the cloud and Google is helping organizations like Best Buy and the US Navy use these tools to solve issues like improved customer experience and accelerated maintenance of vessels.

Second, Google is seeing organizations wanting more collaborative tools. To cater to this demand, Google announced a Google workspace that will bring together its communication and collaboration apps and ensure that they work better together. Organizations like the State of West Virginia and shipping company Ocean Network Express are already using this service to improve collaboration productivity for their employees.

During the last quarter, Google Cloud’s growth showed moderate acceleration. Cloud revenues grew 45% over the year compared with 43% reported a year ago. But growth has slowed down. In the first quarter of the year, Google’s cloud revenues had grown 52% over the year. Google continues to languish behind Microsoft and Amazon in the market and is trying to address that by investing in partnerships.

Google runs a Partner Advantage program that allows thousands of already vetted companies to work with its technology to build products, develop innovative solutions, and create new opportunities for its customers on the cloud. The Google Cloud Partner Program provides marketing, sales, support, training, and technical resources to help businesses leverage Google Cloud offerings. It offers new revenue opportunities to both managed service providers (MSPs) and value-added resellers (VARs). Google plans to have partners involved in 100% of its new deals. Its partner program is not only helping Google expand its cloud presence, but is also helping the partners grow themselves.

According to an IDC report, revenue for Google Cloud partners grew 35%, with almost 20% seeing growth rates of over 75%. IDC also forecasts that, by 2025, partner revenue from Google Cloud opportunities will more than triple and accumulated net-new partner revenue will grow to $341 billion by 2025.

The market was pleased with Google’s results and the stock climbed 3.3% in the after-hours session. Its stock is trading at $1,650.21 with a market capitalization of $1.11 trillion. It had climbed to a record high of $1,733.18 in July this year. The stock had fallen to a 52-week low of $1013.54 in May last year.

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