How Is Yandex’s Cloud Business Performing?

Yandex’s (YNDX) first-quarter earnings results, which are scheduled for release on April 25, will be the company’s first full-quarter financial results since it opened its cloud platform to everyone. Yandex.Cloud, as the cloud computing service is called, opened to all customers in December 2018 following a few months of limited rollout in Russia.

When discussing its fourth-quarter earnings results in February, Yandex’s management talked about the cloud business. Mikhail Parakhin, Yandex’s chief technology officer, said at an investor briefing that Yandex.Cloud was performing in line with the company’s expectations. The executive went on to reveal that Yandex.Cloud had attracted 50,000 users as of the end of 2018.

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Venturing into the business of providing cloud computing services is one of the ways in which Yandex is seeking to diversify outside the advertising market. At the moment, Yandex derives close to 80% of its revenue from advertising sales, but it wants to build a more diversified business by opening up other revenue streams beyond advertising.

In the cloud market, Yandex is vying for a $214.3 billion revenue opportunity this year, according to Gartner estimates. Although Yandex may have some home advantages in the Russian cloud market, the company is entering a crowded global cloud market dominated by Amazon (AMZN) and Microsoft (MSFT). According to Synergy Research estimates, Amazon held 35% of the global cloud market share at the end of 2018, followed by Microsoft with a 15% market share. Google (GOOGL) and IBM (IBM) tied in third place with 7.0% market shares each, and Alibaba (BABA) rounded out the list of the top five with a market share of ~5.0%.