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Cloud Services Revenue Run Rates: Misleading?

When Google recently disclosed a cloud revenue run rate of $8 billion annually, Wall Street stood up and cheered.

Under new Google Cloud CEO Thomas Kurian, the search giant finally seems to be gaining traction in the cloud services world, pundits believe. Generally speaking, ChannelE2E agrees with that assessment. But we also caution readers: Revenue run rates, especially when disclosed as a sound bite without any audited data, can sometimes be misleading.

As Investopia points out, “a run rate functions as an extrapolation of current financial performance and assumes that current conditions will continue.”

In other words, Google’s most recent monthly cloud revenues were likely about $667 million. Multiply that figure by 12, and you achieve the $8 billion annual run rate. The figure certainly does NOT represent:

  • Google’s most recent 12 months of cloud revenues (which were likely considerably lower);
  • nor do they guarantee actual cloud revenues over the next 12 months, which could be higher or lower based on new customers; existing customer expansion or contraction; churn and plenty more.

Also of note, the Google Cloud revenue run rate includes revenue for both (A) Google Cloud Platform and (B) Google G Suite — essentially IaaS, PaaS and SaaS lumped together.

For some strange reason, much of the media is comparing those combined Google figures (again, IaaS+PaaS+SaaS) vs. pure IaaS figures from Microsoft Azure. Lump in Microsoft’s SaaS figures (namely Office 365) with Azure figures, and Microsoft’s cloud lead over Google is likely massive.

Cloud Market Share Figures: Gartner IaaS Research

So what’s the true picture here? In the pure IaaS market, both Amazon Web Services (47.8 percent market share) and Microsoft Azure (15 percent) have big leads over Google Cloud Platform (4 percent), Gartner estimates based on full-year figures for 2018.

Still, Google for the first time in a year or so is finally discussing cloud revenues again — pointing to an $8 billion annual run rate. That’s roughly double the run rate the company shared back in 2017. Signs of progress? Absolutely. A true disclosure that fully captures Google’s actual cloud services revenues? Certainly not.

Actual Google Cloud Revenue Figures: Coming Soon?

So why doesn’t Google disclose actual cloud revenue figures on a more consistent basis? The simple answer: Google didn’t have a strong story to share before Kurian’s arrival, coupled with recent M&A deals.

Anecdotal evidence suggests the revenue story is now improving. If and when Google actually discloses audited cloud revenues on a quarterly basis, you’ll know that the company truly is gaining ground against AWS and Azure.

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