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Google's Deal With Deutsche Bank to Bolster Cloud Presence

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Alphabet’s (GOOGL - Free Report) division Google is strengthening presence in the cloud market on the back of deals and partnerships.

Google has agreed to sign a long-term partnership with Deutsche Bank (DB - Free Report) , the largest bank in Germany.

Per the new alliance, Deutsche Bank will leverage Google’s cloud services to build technology-based financial products for clients and deliver enhanced cloud services. These financial products will be based on growing technologies like Artificial Intelligence, data science and machine learning.

These new technologies will assist the bank’s treasury clients with tasks such as cash flow forecasting, improved risk analytics and advanced security solutions.

In addition to the above, both the companies plan to make investments in technology and share the resultant revenues between them.

The deal is a testament toward Google’s strong focus on innovating offerings in the emerging cloud market to drive customer momentum.

Alphabet Inc. Price and Consensus


Deal Rationale

We believe the deal is a win-win for both the companies.

Google’s strong cloud portfolio has been able to generate a solid client base. The company is gaining traction from a robust demand environment as customers are undergoing a major digital transformation. It is benefiting from the growing adoption of cloud offerings, aided by the expanding partner ecosystem.

The latest deal is a strategic win for Google as Thomas Kurian, the head of Google’s cloud division, has been making sincere efforts to make the financial industry one of his key customer targets.

The latest move is likely to be a major breakthrough for Google Cloud in the financial sector, which holds significant prospects.The company already has HSBC Holdings plc as its client.

Reportedly, Deutsche Bank expects to make a cumulative return on investment of 1 billion euros ($1.1 billion) through the deal over the coming 10 years.

We believe the latest deal bodes well for Google’s persistent efforts toward expanding presence in the promising cloud space, which is witnessing solid demand owing to ongoing digitization in the country.

Google Poised for Further Growth in 2020

Google Cloud is making every effort to further bolster presence in the cloud space.

In April, Google announced first-quarter results, wherein the company’s cloud sales — which include Google Cloud Platform and G Suite — surged 52% to $2.77 billion from $1.83 billion a year ago.

Its G Suite collaboration and productivity tools — which include Gmail, Hangout, Calendar, Currents and Docs — have more than 6 million paying customers. Google Cloud’s annual revenue run rate is now more than $11.08 billion.

Google’s cloud business is likely to grow in the coming days as working from remote location explodes, while many tech companies may take a hit. The search engine giant is also expanding its cloud service. In February, Google closed the $2.4-billion acquisition of data analytics company Looker.

In January, Google partnered with Airtel, the third-largest telecommunication services company of India, enabling the latter to offer Google Cloud’s G Suite — a suite of cloud computing, productivity and collaboration tools, software and products — to its business clients.

The latest partnership is likely to strengthen Google’s competitive position against Microsoft (MSFT - Free Report) , Amazon (AMZN - Free Report) and International Business Machines, among others, which are also leaving no stone unturned to capitalize on the prospects in the cloud space.

Zacks Rank

Currently, Alphabet carries 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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