Google Cloud has hit a $10 billion annual revenue run rate, Google said Monday as its parent company Alphabet reported fourth quarter fiscal 2019 results. The growth in Cloud, up 53 percent year-over-year, was driven by significant growth in the Google Cloud Platform (GCP).
“The growth rate of GCP was meaningfully higher than that of Cloud overall, and GCP’s growth rate acclerated from 2018 to 2019,” Sundar Pichai, CEO of Alphabet and Google, said on Monday’s conference call.
Google offered these details as part of the new, expanded revenue disclosures in its financial reports. In addition to Cloud, the company is now disclosing revenue specifically from Search and YouTube ads.
For Q4 2019, Google Cloud brought in $2.614 billion, up from $1.709 billion a year prior. For the full fiscal 2019, the cloud business brought in $8.918 billion, up from $5.838 billion in 2018 and $4.056 billion in 2017.
GCP growth was led by Google’s infrastructure offerings and its data and analytics platform, CFO Ruth Porat said. “We also saw a strong uptake of our multi-cloud Anthos offering,” she said. Meanwhile, ongoing growth in G Suite continued to reflect growth in both SMB and enterprise segments.
The number of cloud deals over $50 million more than doubled year-over-year, Pichai said. He highlighted major customers, such as Wayfair and Lowe’s. Lufthansa Group is using Google’s AI solutions to develop new tools to improve air travel operations, while the US Postal Service chose Google Cloud AI to improve business processes and customer experience. Google also recently signed a 10-year agreement with Sabre to help them improve operations and develop new airline and hospitality services.
“We are increasingly doing much larger deals,” Pichai said. “These deals can span beyond Cloud as well.”
As an example, Pichai continued, an automotive company could work with Google across Cloud, Android Auto and in some cases Waymo, the self-driving vehicle business that spun off from Google. In an area like health care, a customer may want to leverage the industry expertise found across Google and Alphabet.
“When people engage with us on Cloud, they’re interested in a bigger digital transformation, across the board,” Pichai said.
Under the direction of Thomas Kurian, Google Cloud is focused on six verticals across 21 markets, and Google is investing aggressively in the effort, Porat stressed. The company is on track to triple its Cloud salesforce over three years, and it’s expanding its product offerings and compliance certifications.
In terms of Alphabet’s overall Q4 results, diluted earnings per share came to $15.35 on revenue of $46.075 billion, up 17 percent year-over-year.
Analysts were expecting earnings of $12.59 per share on revenue of $46.94 billion.
For the full fiscal 2019, Google reported diluted EPS of $49.16 on revenues of $$161.86 billion, up 18 percent year-over-year.
“Our investments in deep computer science, including artificial intelligence, ambient computing and cloud computing, provide a strong base for continued growth and new opportunities across Alphabet,” Pichai said in a statement. “I’m really pleased with our continued progress in Search and in building two of our newer growth areas — YouTube, already at $15 billion in annual ad revenue, and Cloud, which is now on a $10 billion revenue run rate.”
Advertising brought in the most revenue for Google, accounting for $37.934 billion in Q4 and $134.81 in FY 2019.
Google Search and other ad revenue (excluding YouTube) brought in $27.185 billion in Q4, up from $23.32 billion a year prior. For the full year, revenue was $98.115 billion, up from $85.296 billion in 2018 and $69.81 billion in 2017.
Q4 revenue for YouTube ads was $4.717 billion, up from $3.605 billion a year prior. Full year revenue from the segment came to $15.149 billion, up from $11.155 billion in 2018 and $8.15 billion in 2017.
Alphabet’s moonshot “Other bets” category brought in $172 million in sales in Q4 and $659 million for the full year.
July economic data soured on the back of China’s restrictive zero-Covid policy.
China’s central bank cut lending rates on Monday.
Crude prices crashed by more than 5% on Monday morning.
Oil prices fell sharply on Monday, dragged down by disappointing economic data from the world’s largest crude oil importer and the world’s second-largest crude oil consumer.
The price of WTI and Brent crude fell by more than 5% as China’s central bank cut lending rates to light a fire under demand, as its July economic data soured on the back of China’s restrictive zero-Covid policy. Further dragging down China’s July economic data is its property crisis, which saw property investments fall by 12.3% in July—the fastest rate this year.
Both the disappointing economic data and the central bank rate cut came as a surprise to the market. Chinese policymakers now expect China to miss its targeted economic growth rate of 5-5.5% in the second half of the year.
The July data surprise sent WTI crashing to $87.22 per barrel, a $4.87 (-5.29%) on the day. Brent crude fell to $93.23 per barrel, a loss of $4.92 (–5.01%) on the day.
China’s oil refinery data was also a disappointment, with its refinery output falling to 12.53 million bpd—the lowest level since March 2020 and 8.8% lower than processing rates in July 2021 due to unplanned shutdowns at state-run refineries such as Sinopec and PetroChina and shrinking refining margins. Also in the mix is a new round of tax probes that the Chinese government is prepared to launch on private teapot refiners—another potential trigger for refinery slowdowns. Teapots account for one-fifth of China’s crude oil imports.
China imports more than half of the oil it consumes, mainly from Saudi Arabia, Russia, Iraq, and Oman.
The Iran factor also played into oil prices on Monday, with Iran suggesting that it could find a way to agree on a nuclear deal “in the near future” if the U.S. would consider its “red lines”. A finalized nuclear deal could send more oil barrels into the market.
U.S. stocks clawed back from a downbeat start to the trading week Monday as Wall Street looked to extend a summer rally that saw equity markets log their longest winning streak in 10 months in Friday’s session.
The S&P 500 rose 0.2% after the benchmark index marked its fourth straight week of gains, officially recouping half of its bear market losses this year. The Dow Jones Industrial Average added 110 points, or roughly 0.3%, and the Nasdaq Composite gained 0.4%.
Shares of Disney (DIS) jumped 2.7% after Daniel Loeb’s Third Point revealed a new stake in the company and urged CEO Bob Chapek in a letter to make a series of changes, including integrating Hulu directly into the Disney+ DTC platform and acquiring Comcast’s remaining minority stake before the early 2024 deadline. The letter also recommended ESPN be spun off to shareholders to help its parent company pay off debt.
The Federal Reserve Bank of New York’s general business conditions index, a measure of the state’s manufacturing activity, posted its second largest drop since 2001, with declines in orders and shipments reflecting a dramatic drop in demand. The gauge fell more than 42 points to -31.3, the second-worst drop in more than two decades after April 2020’s print. The reading came in weaker than the lowest economist estimate, according to Bloomberg data. Readings below zero indicate a contraction.
Elsewhere in economic data, the National Association of Home Buyers/Wells Fargo homebuilder sentiment index also disappointed — falling by 6 points to 49 in August. The reading came in lower than Bloomberg’s most downbeat economist forecast and below the breakeven measure of 50 for the first time since May 2020.
Investors have cheered on the summer’s rally after a series of better-than-expected economic releases renewed optimism on Wall Street. But some strategists remain skeptical of the market rebound as risks associated with inflation and monetary tightening persist.
“The macro, policy and earnings set-up is much less favorable for equities today,” Morgan Stanley’s Michael J. Wilson wrote in a note. “The risk/reward is unattractive and this bear market remains incomplete.”
Overseas, data out of China on Monday showed a slowdown in economic activity across the board last month. The world’s second largest economy saw retail sales, industrial output and investment all come in lower than economists expected in July.
China’s central bank also unexpectedly cut its key interest rate in an effort to turn lagging economic growth around as President Xi Jinping seeks re-election.
The Wall Street Journal reported that Chinese officials are arranging plans for a face-to-face meeting between Xi Jinping and President Biden in Southeast Asia this fall — a trip that would mark their first in-person meeting since Biden was inaugurated.
Oil futures tumbled over concerns about demand in China and the prospect for higher exports out of Iran. U.S. West Texas Intermediate and Brent crude oil each fell roughly 4.5% to $87.97 and $93.66 per gallon, respectively.
Back in the U.S., investors look ahead to a busy week for retail, with the Commerce Department set to release its key monthly report on retail sales Wednesday and earnings due out from Walmart (WMT), Target (TGT), the Home Depot (HD) and other consumer giants.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
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