| April 28
April 28 Alphabet Inc's
non-advertising business, which houses its cloud unit, Pixel
smartphones and the Play store, has long been sandwiched between
Google's advertising juggernaut and its moonshot ventures that
have captured popular imagination.
Not any more.
The business, categorized as "Other Revenue" in its earnings
report, posted a 49.4 percent jump in revenue to $3.10 billion
on Thursday - a sum already bigger than Twitter Inc's
The business now represents about 13 percent of Alphabet's
total revenue, compared with 10 percent a year earlier.
That may not be a big jump but definitely shines a light on
Google's efforts to cut down its dependence on revenue from
advertising, where it competes with Facebook Inc.
"(Google) is doing a good job, a much better job in
diversifying revenue than Facebook is," said analyst James Wang
of ARK Investment Management. "We think that is quite an
Alphabet does not break out revenue contribution within the
"Other Revenue" segment. But analysts have said that cloud is
the most prominent among the category's clutch of businesses.
To be sure, Google's cloud venture is still much smaller
than market leader Amazon.com Inc's Amazon Web Services
and Microsoft Corp's Azure.
But Google is investing heavily.
"In Q1, our largest growth in headcount and capital
expenditure was in cloud," Google Chief Executive Sundar Pichai
said on a call with analysts on Thursday.
Amazon's cloud business grew 43 percent to $3.66 billion in
the first quarter. Microsoft's cloud unit grew 93 percent.
"We believe Google will continue to gain traction in the
cloud market, and when combined with Google Play and sales of
Google's hardware products, we see Google's 'other' revenue
growing 38 percent to nearly $14 billion in 2017," Morningstar
analyst Ali Mogharabi wrote in a client note.
The company's hardware business also started gaining
traction after Google released a pair of high-profile hardware
products last year - the Pixel phone and the Google Home, a
smart speaker like Amazon's Echo.
"People are hankering for a really awesome Android phone
that basically gives them the iPhone experience," Wang said,
adding that the growth in Google's "other revenue" bucket this
quarter "shows sustained momentum for the Pixel."
Still, the lion's share of Alphabet's revenue comes from ads
and that's not going to change any time soon.
Total advertising revenue increased 18.8 percent to $21.1
billion in the first quarter, the company reported on Thursday.
Profit also rose 29 percent to $5.43 billion, beating Wall
At least 10 brokerages raised their price targets on the
stock after the earnings report.
Alphabet's drive for diversification also includes its
"Other Bets" business, considered the company's loss-making arm.
The business, home to the Waymo self-driving car, Google
Fiber and thermostat-maker Nest, posted a first-quarter loss of
Google's shares were up 4 percent in premarket trading on
Friday. They have gained 12.5 percent this year.
(Reporting by Supantha Mukherjee in Bengaluru and Julia Love in
San Francisco; Additional reporting by Geetha Panchaksharam;
Editing by Saumyadeb Chakrabarty)