Google is quietly building this money-making business that could rival Amazon's

Brian Sozzi
Editor-at-Large

It’s time to give some respect to Alphabet’s cloud business, which for years has taken a backseat to the larger cloud platforms at Amazon and Microsoft.

Because unbeknownst to many folks other than the 5,000 global businesses that now use Google Cloud and the engineers and salespeople inside the tech giant working on the product, Alphabet is developing quite a surging business.

Alphabet said Monday that sales in its “other” business — which comprises Cloud, Hardware and Play — rose an impressive 31% to $6.5 billion in the fourth quarter. The sales growth rate marked an acceleration from the 29% seen in the third quarter.

Big wins in cloud

Alphabet doesn’t disclose the precise sales of its cloud business. But the “other” segment is generally viewed as mostly comprised of cloud.

The wins in the quarter were plentiful, according to Google CEO Sundar Pichai. Alphabet more than doubled the number of Google Cloud platform deals over $1 million as well as the amount of multi-year contracts signed.

Alphabet Chief Financial Offer Ruth Porat told analysts on a conference call she is seeing a “nice uptick” in the number of cloud deals north of $100 million.

“Google Cloud closed out the year strong, with momentum across the business,” Pichai added on the call. “We continue to see strong growth in all our major geographies and industries this quarter.”

The company entered its 18th market for cloud services in the fourth quarter.

Alphabet is now staffing up in its cloud unit to spur even faster growth, part of the reason investors were let down by the company’s profit margins in the quarter. Growth costs money, people. Google Cloud Chief Technology Officer Brian Stevens told Yahoo Finance in late January the cloud team is focused on adding a combination of engineers and salespeople.

Stevens said the business is also very focused on bringing machine learning capabilities to its cloud customers.

Google Cloud playing catch

Google Cloud is still dwarfed in size by Amazon Web Services and Microsoft’s Intelligent Cloud business. Amazon Web Services and Microsoft’s Intelligent Cloud businesses hauled in $7.4 billion and $9.4 billion in sales, respectively, in the most recent quarter.

But both competitors should keep a close eye on Alphabet’s more aggressive posture in expanding its cloud solutions for businesses. It could lead to more competitive pricing and an all-out war for already scarce tech talent.

Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi

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