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Google Cloud Strength to Aid Alphabet's (GOOGL) Q2 Earnings

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Alphabet’s (GOOGL - Free Report) second-quarter 2021 results, which are scheduled to be released on Jul 27, are likely to reflect gains from its strengthening cloud service offerings.

The company’s cloud arm — Google Cloud — has turned out to be the key catalyst behind its business growth.

Notably, the company’s cloud offerings include Google Cloud Platform and Google Workspace, which are continuously gaining momentum in the booming cloud computing market. Google’s growing investments in infrastructure, security, data management, analytics and AI remain major positives.

The Google Cloud segment, which derives revenues from fees collected for Google Cloud Platform services and Google Workspace collaboration tools, is constantly driving substantial revenue growth for Alphabet.

Revenues from the segment were $4.05 billion in first-quarter 2021. The figure accounted for 7.3% of total revenues and exhibited year-over-year growth of 45.7%.

For second-quarter 2021, the Zacks Consensus Estimate for Google Cloud revenues is pegged at $4.41 billion, suggesting growth of 46.5% from the prior-year quarter’s reported figure.

Click here to know how the company’s overall second-quarter results are likely to be.

Alphabet Inc. Revenue (TTM)


Alphabet Inc. Revenue (TTM)

Alphabet Inc. revenue-ttm | Alphabet Inc. Quote

Factors to Consider

Google’s strengthening efforts toward the expansion of its cloud services portfolio, data centers, availability zones and regions are likely to have helped it in gaining share in the highly competitive cloud market.

Google Cloud introduced a no-code development platform, AppSheet, in a bid to aid companies in seamless management of their operations in the scenario, wherein offices have started to reopen. AppSheet helps in building customized apps and automation by leveraging machine learning (ML).

The company made its BigQuery row-level security generally available in the quarter-to-be-reported. This expanded Google Cloud’s portfolio of access controls.

In order to deliver an enhanced Ubuntu experience, the company made Ubuntu Pro images on Google Cloud generally available.

The company announced the availability of the Transfer Appliance Cloud Setup application. Google Cloud rolled out Cloud TPU VMs in order to aid customers in establishing their interactive development environment on each TPU host machine.

A managed ML platform called Vertex AI was made available generally, which bolstered Google Cloud’s ML efforts.

The company announced the launch of a product namely, smart canvas, by which it strives to deliver an enhanced collaboration experience to Google Workspace customers.

On the heels of the portfolio strength, Google Cloud was successful in winning deals in the quarter under review. It struck a cloud partnership with Jio Platforms in India, per which it will support the latter in the 5G push with technology solutions.

It won a deal from Varian Medical Systems, in which it is aiding in the development of an advanced AI-based diagnostic platform, which helps in the battle against cancer.

All these endeavors are expected to have benefited the second-quarter performance of Google Cloud. Strengthening cloud offerings along with growing clientele are likely to have aided Google Cloud’s competitive position against its peers like Amazon’s (AMZN - Free Report) AWS, Microsoft’s (MSFT - Free Report) Azure, Alibaba’s (BABA - Free Report) cloud arm and  IBM Cloud. This is also likely to get reflected in the upcoming results of Alphabet.

Currently, Alphabet carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.