- A Wall Street analyst said Google's cloud business, which posted revenue of $9 billion, up 50% year-over-year, is the size of Amazon's cloud business about five years ago.
- But Morgan Stanley analyst Brian Nowak said Google's cloud division is growing at a slower pace, noting that Amazon Web Services was expanding at a rate of 60% year-over-year in the 2015-2016 period.
- Nowak said Google needs to post a faster growth rate for its cloud business for him to consider the division as a key growth driver for the tech giant.
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Google's cloud business, which is challenging bigger rivals Amazon and Microsoft, is growing - but not quite fast enough, a Wall Street analyst said Tuesday.
Google said Monday that its cloud business hauled in about $9 billion in the last three months of December, up 53% from the year-ago period.
It was the first time the tech giant reported quarterly revenue for its cloud business, the third-biggest after Amazon Web Services and Microsoft.
"Google Cloud is what we thought it was," Morgan Stanley analyst Brian Nowak told clients in a note. He also noted that Google's cloud business was roughly the size of rival Amazon's cloud business circa 2015 or so, "though growing slower."
And it's a significant point, Nowak said.
He noted that Google has "taken multiple steps" to give its cloud business a boost, including new and stronger management and major changes to its sales and marketing organization which are "expected to triple sales force over next three years."
But Nowak, who has an overweight target on Google with a price target of $1,560, said the tech giant "will need to deliver faster growth in order to get credit or multiple expansion for this business."
Google has been more aggressive in forming alliances to boost its cloud presence. It recently said that Accenture has decided to move a key life sciences business to the Google platform. In October, Google Cloud CEO Thomas Kurian announced that it was joining forces with HCL, a major IT services powerhouse.
Nowak's view underscores the challenges faced by Google in the cloud where it is struggling to keep up with Amazon and Microsoft in a steadily growing market.
On Monday, Synergy Research Group said spending on cloud infrastructure services jumped by 37% year-over-year in the fourth quarter. Total spending exceeded $27 billion in that period, over $96 billion for 2019.
Google shares slipped 3% in Monday trades to $1,440.
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