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Alphabet is Gaining Traction in Cloud, Should Amazon Worry?
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Alphabet’s (GOOGL - Free Report) Google recently got a new cloud customer, Shopify (SHOP - Free Report) , leaving behind Amazon (AMZN - Free Report) . Shopify is a provider of a multi-tenant, cloud-based, multi-channel commerce platform for small and medium-sized businesses (SMBs). The partnership will enable Shopify to host its Internet-based stores on Google’s cloud platform.
Notably, Shopify’s decision to go for Google’s cloud services, in spite of its existing partnership with Amazon for the cross-selling of their products, is something to ponder on. Amazon is currently a leader in the cloud platform market but such developments make us apprehensive of whether Amazon Web Services (AWS) would be able to maintain its dominant position in the long run.
Google Cloud versus AWS
Per a recent report by Synergy Research Group, spending on cloud infrastructure based services saw a 46% year-over-year increase in the fourth quarter of 2017. Full-year 2017 revenues surged 44% from the previous year.
At the end of 2017, though Amazon managed to maintain its leadership, its growth rate was 0.5% compared with 1% growth for Google. The slower growth rate for AWS may be a major concern in the face of growing competition in the cloud market.
However, the functionality, partner ecosystem and the experience AWS offers are likely to lead to continued customer wins. Notably, the recent introduction of five new AWS Elemental Media Services — MediaConvert, MediaLive, MediaPackage, MediaTailor, and MediaStore — is anticipated to positively impact the company’s financials going ahead.
We believe the different pricing strategies will have a huge role to play in the adoption of the cloud platforms, going ahead.
While Google’s cloud platform offers on-demand real time pricing, AWS provides substantial discounts but only for long-term deals and advance payments. This has placed Google in a favorable position as its strategy enhances the flexibility of cloud.
Customer Wins Drive Google
Despite being a pretty late entrant in the cloud market, Google has come up with impressive strategies to put up a strong fight against competitors. Most recently, the company entered into a deal with CSRA, a provider of information technology services and solutions to the U.S. federal government customers. Additionally, the company’s partnerships with the likes of HubSpot, Box and Nutanix are expected to boost its cloud business.
Moreover, Google has an advantage over Amazon when it comes to expanding its cloud clientele. It is not a direct competitor of online retail companies. Prior to Shopify, Williams-Sonoma Inc. had selected Google Cloud over AWS, which is kind of testament to the fact.
Furthermore, tech giant Apple's announcement that it uses Google’s cloud platform for the storage of iCloud services data has also strengthened the latter’s position in the cloud market.
Cloud still remains an expanding market with high growth prospects. In a recent report, Gartner projected the public cloud market to reach $411.4 billion by 2020. We believe Google with its ongoing initiatives is well poised to grab the growth opportunity.
Amazon, having started offering cloud infrastructure service long before its competitors, gained a first mover advantage and enjoys a leading position in the market. However, per a recent article by CNBC that quoted KeyBanc, Amazon lost public cloud market share to Microsoft’s (MSFT - Free Report) Azure and Google Cloud in the fourth quarter of 2017.
Hence, Amazon should be extra cautious about maintaining its lead in this highly competitive space as Microsoft, IBM and Google are ramping up their cloud initiatives.
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Alphabet is Gaining Traction in Cloud, Should Amazon Worry?
Alphabet’s (GOOGL - Free Report) Google recently got a new cloud customer, Shopify (SHOP - Free Report) , leaving behind Amazon (AMZN - Free Report) . Shopify is a provider of a multi-tenant, cloud-based, multi-channel commerce platform for small and medium-sized businesses (SMBs). The partnership will enable Shopify to host its Internet-based stores on Google’s cloud platform.
Notably, Shopify’s decision to go for Google’s cloud services, in spite of its existing partnership with Amazon for the cross-selling of their products, is something to ponder on. Amazon is currently a leader in the cloud platform market but such developments make us apprehensive of whether Amazon Web Services (AWS) would be able to maintain its dominant position in the long run.
Google Cloud versus AWS
Per a recent report by Synergy Research Group, spending on cloud infrastructure based services saw a 46% year-over-year increase in the fourth quarter of 2017. Full-year 2017 revenues surged 44% from the previous year.
At the end of 2017, though Amazon managed to maintain its leadership, its growth rate was 0.5% compared with 1% growth for Google. The slower growth rate for AWS may be a major concern in the face of growing competition in the cloud market.
However, the functionality, partner ecosystem and the experience AWS offers are likely to lead to continued customer wins. Notably, the recent introduction of five new AWS Elemental Media Services — MediaConvert, MediaLive, MediaPackage, MediaTailor, and MediaStore — is anticipated to positively impact the company’s financials going ahead.
We believe the different pricing strategies will have a huge role to play in the adoption of the cloud platforms, going ahead.
While Google’s cloud platform offers on-demand real time pricing, AWS provides substantial discounts but only for long-term deals and advance payments. This has placed Google in a favorable position as its strategy enhances the flexibility of cloud.
Customer Wins Drive Google
Despite being a pretty late entrant in the cloud market, Google has come up with impressive strategies to put up a strong fight against competitors. Most recently, the company entered into a deal with CSRA, a provider of information technology services and solutions to the U.S. federal government customers. Additionally, the company’s partnerships with the likes of HubSpot, Box and Nutanix are expected to boost its cloud business.
Moreover, Google has an advantage over Amazon when it comes to expanding its cloud clientele. It is not a direct competitor of online retail companies. Prior to Shopify, Williams-Sonoma Inc. had selected Google Cloud over AWS, which is kind of testament to the fact.
Furthermore, tech giant Apple's announcement that it uses Google’s cloud platform for the storage of iCloud services data has also strengthened the latter’s position in the cloud market.
Alphabet Inc. Price
Alphabet Inc. Price | Alphabet Inc. Quote
To Conclude
Cloud still remains an expanding market with high growth prospects. In a recent report, Gartner projected the public cloud market to reach $411.4 billion by 2020. We believe Google with its ongoing initiatives is well poised to grab the growth opportunity.
Amazon, having started offering cloud infrastructure service long before its competitors, gained a first mover advantage and enjoys a leading position in the market. However, per a recent article by CNBC that quoted KeyBanc, Amazon lost public cloud market share to Microsoft’s (MSFT - Free Report) Azure and Google Cloud in the fourth quarter of 2017.
Hence, Amazon should be extra cautious about maintaining its lead in this highly competitive space as Microsoft, IBM and Google are ramping up their cloud initiatives.
Zacks Rank
Both Alphabet and Amazon currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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