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Are Alphabet’s Cloud Investments Bearing Fruit?

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Dec. 4 2020, Updated 10:52 a.m. ET

$30 billion funneled into cloud infrastructure

While announcing its plans for three new undersea cable systems and five new cloud regions, Alphabet’s (GOOGL) Google also disclosed that it had invested $30 billion into expanding its cloud infrastructure over the last three years. These investments have gone into laying undersea cable networks and opening more cloud data centers to speed up cloud services at a time when Google has been gunning for a larger share of the cloud computing market.

Google has invested a lot in subsea cable systems in recent years. Including its three planned cable networks, the company says it has direct investments in 11 submarine cables.

“Together, these investments further improve our network—the world’s largest—which by some accounts delivers 25% of worldwide internet traffic,” said Ben Treynor Sloss, an executive in Google’s cloud division.

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Snap spending $2.0 billion to use Google cloud

Apple (AAPL), PayPal (PYPL), and Facebook (FB) rival Snap (SNAP) are some of Google’s notable enterprise cloud customers. Apple has reportedly shifted some of its cloud workloads to Google Cloud from Amazon’s (AMZN) Amazon Web Services (or AWS) in what’s been viewed as a multicloud strategy. PayPal also favors a multicloud strategy. Snap, which runs the Snapchat app, has committed to spending $2.0 billion on cloud computing services from Google over the next five years. It has also signed a $1.0 billion cloud computing contract with AWS.

Cloud segment grew 40%

As Alphabet reports its 4Q17 results, investors will be looking to see not only if the company’s cloud investments are bearing fruit but also how fast its cloud gains are accumulating. Alphabet reports its cloud sales under its Google Other Revenues segment, which also includes hardware and app sales. In 3Q17, this segment recorded a 40% year-over-year rise in revenue to $3.4 billion, with cloud being cited as a growth driver. The Google Other Revenues segment saw a revenue rise of 62% in 4Q16.

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