Zoom Avoids Google Cloud, Rivalry Intensifies

Google’s (NASDAQ:GOOGL) cloud business suffered a blow amid its intensifying rivalry with Zoom Video (NASDAQ:ZM).

The pandemic lockdowns around the world have spurred the work-from-home culture. There has been more demand for remote work software. As a result, Zoom has seen increased demand for its video chat tool, which has provided a huge boost to its stock price. At $135.17 per share at the closing on Thursday, Zoom stock has nearly doubled year-to-date.

Zoom avoids Google cloud, rivalry escalates

Seeing Zoom’s big gains during the pandemic, Google has sought to challenge it for video chat customers. Google has moved to make its Meet video chat tool free for everyone. The Meet video chat tool competes with Zoom. By making the tool free, Google has intensified the rivalry. Seeing Google’s attacks on its core business, Zoom has given Google cloud a wide berth. Notably, Zoom bypassed Google and signed Oracle (NASDAQ:ORCL) as its new cloud computing provider.

Google is one of the world’s top-three cloud providers alongside Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT). Zoom already uses Amazon and Microsoft clouds. Google cloud has been the next pick for many Amazon and Microsoft cloud customers wanting to diversify their vendors. However, Zoom has chosen to go a different direction. The company might have reduced the momentum in Google’s efforts to close the gap with the market leaders.

Right now, Google cloud trails Amazon and Microsoft by a wide margin. The company finished the first quarter of 2020 with an 8.0% share of the global cloud market, according to Synergy Research. In comparison, Amazon commands a whopping 32% share of the global cloud market share. Microsoft has an 18% share of the market.

Boycott might slow down Google’s momentum

Google has been working toward becoming the largest cloud company in the world in five years. However, Zoom avoiding Google cloud is a setback for the goal. Zoom decided to take its cloud business to Oracle and snub Google. Currently, Google and Oracle are embroiled in a high-stakes legal tussle.

Google’s cloud business generated $2.8 billion in revenue in the first quarter, which marked a 55.6% increase from a year ago. The cloud market presents a lucrative revenue opportunity. Gartner estimates that global cloud spending will top $266 billion in 2020 from $228 billion in 2019 and $197 billion in 2018.

At $1,346.70 per share, the stock of Google parent Alphabet trades at a 12% discount to its 52-week peak. Zoom stock also spots a 26% discount to 52-week high following the recent pullbacks amid mounting competition.