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Google Cloud Worth $225B, Deutsche Bank Says
- mylons 7y agoAmazon is under valued.
- toomuchtodo 7y agoOr everyone is overvalued and these are fantasy numbers pulled from the unicorn forest. There is no repercussion when an analysts predictions are "overly optimistic" (see: everyone pitching $50B-$100B valuations to WeWork to get their IPO biz). Throwing darts would be just as accurate as the predictions investment banks are throwing out.
- pmart123 7y agoWell, AWS actually is highly profitable and changed the game so most of the recent startups could actually be built. I wouldn't associate WeWork with it. I won't even associate Tesla with WeWork. At least if you give $10B to Musk, you get rocket ships and category-leading car companies out of it.
- toomuchtodo 7y agoAWS is only highly profitable for an investor if you cut it loose from Amazon retail so it's not subsidizing it (spin it out) and other Amazon endeavors that aren't profitable. Otherwise, it's only of benefit to Amazon proper.
- resoluteteeth 7y agoIncredible. They don't even mention Amazon.
- x86_64Ubuntu 7y agoKind of telling how the chart has Oracle, Adobe and Intel as "peers" but AWS is nowhere to be seen. I didn't even know Intel or Adobe had cloud offerings.
- gundmc 7y agoThe chart shows the entire market value of select other tech Giants, not their cloud offerings. The purpose of the graphic was to say "Google Cloud is now worth more than all of Oracle", not to show Google's place in the cloud market relative to Amazon and Microsoft.
- llampx 7y agoYou can't say tech giant without mentioning Amazon or Microsoft.
- jedberg 7y ago> I didn't even know Intel or Adobe had cloud offerings. Google includes their SaaS offerings as part of Google Cloud (like Gmail and Docs). Intel and Adobe have SaaS offerings. They're comparing Gmail to hosted Photoshop basically.
- cameronbrown 7y agoG Suite for businesses, not all of Gmail.
- adventured 7y agoAdobe's market cap has gone from a stagnant $20-$30x billion, to being as valuable as SAP, in five years, solely due to their booming cloud subscription business. Previously the stock hadn't net climbed higher basically between the dotcom bubble in 2000 and 2013. Here is their chart back to 1986: https://i.imgur.com/lVeAGHQ.jpg https://i.imgur.com/lVeAGHQ.jpg Sales were hardly moving for years and have soared since fiscal 2015, from $4.7b to $10.6b (last four quarters). In that time operating income more than tripled from $900m to $3b.
- tpmx 7y agoNot paywalled: https://www.datacenterknowledge.com/google-alphabet/google-cloud-worth-double-ibm-market-cap-deutsche-bank-says https://www.datacenterknowledge.com/google-alphabet/google-c...
- sdan 7y agoNot surprised. If AWS can't make their UI a bit more user-friendly (especially for beginners) and remove their AWS Educate for students (which by the way is horrible), I think a good chunk of developers and possible institutions might move over to GCP. Other that UI, I think GCP in some instances may be cheaper (pretty sure I saw some instances that were cheaper... although I can't say for sure).
- chickenpotpie 7y agoI've always joked that the best argument for using infrastructure as code is you get to look at AWS's bad UI less
- tpmx 7y agoIs it really just the UI that's better designed in GCP compared to AWS? I find the "better designed" thing seems to apply to most aspects.
- sdan 7y agoI don't really consider either having superior UI... but AWS's endless list of services when you click for the dropdown is a bit too much to handle. Not to mention how you'll have to use their search bar to get to what you want. One thing I do credit them on is SSHing into an instance is a lot easier than GCP's "gcloud" way (I say this since I recently found the "gcloud" sdk to take over 10g on my laptop) and even if you use SSH on GCP, they make it considerably harder than AWS (although somewhat more secure for beginners... to prevent from attackers to getting to port 22).
- CodeSheikh 7y agoI am interested to know the valuation of AWS. If the values are apart then it makes sense that AWS was ahead of teh game. If GCP has caught up then that would be blazing-fast improvement.
- bklyn11201 7y agoFrom Bloomberg re GCP: "The unit could report compound annual growth of 55% between 2018 and 2022, and reach annual sales of about $38 billion by 2025" AWS q2 2019 was was 8.4 billion so AWS in 2019 is near where GCP is projected to be in 2025. AWS q1 to q2 growth was 37%, so much slower growth than Azure and GCP. From Barrons earlier this year: "He sees AWS revenues of $36.1 billion this year, growing about 31% a year to $140 billion in 2024. He ... estimates the value of AWS alone as $506 billion." https://www.barrons.com/articles/amazon-stock-web-services-worth-half-a-trillion-dollars-51559060451 https://www.barrons.com/articles/amazon-stock-web-services-w...
- samfisher83 7y agoAWS is probably worth more than Amazon retail. Amazon Retail is a low margin very competitive business.
- freejulian85 7y agoAnd WeWork is worth 40B according to the big banks.
- ifthenelseend 7y agotwo weeks later they said it's only worth ~ 10B
- ztratar 7y agoSoftbank != "the big banks" The public markets did what they were supposed to do to WeWork.
- deleted 7y ago[deleted]
- olivermarks 7y agoTo be fair it was the weWork ipo roadshow banks that came up with that fantastic number
- beering 7y agoMatt Levine made the point that to get chosen as one of the IPO banks, you had to pitch to WeWork that you could get them a good-yet-plausible valuation. I.e., take what their last (private) valuation was, and bump it up by a decent amount. Once you're selected, of course, then reality can take over.
- rrss 7y agoGoldman Sachs = the big banks IIRC Goldman valued WeWork at $60B
- rurp 7y agoGoldman valued WeWork at $60B, as part of their sales pitch to lead the IPO. The context makes all the difference since the point of that valuation was to aid a sales pitch, not be an accurate assessment.
- deleted 7y ago[deleted]
- techie128 7y agoUnfortunately, this is an opinion by a single analyst. Analysts are frequently wrong about their prediction. I would not put a whole lot of stock in it. Post Kurian, GCP has shown _some_ traction but it still has a long catch up game to play. Google really needs to capitalize on its strengths (ML/AI, BigData) in a major way. In addition it has to spend a major chunk of money in educating first-time developers and making it super easy to migrate into the Google ecosystem. We haven't seen major movement in these directions from GCP, yet. Hope they're coming soon. Disclaimer: I am long GOOGL.
- dangerboysteve 7y agoits also Deutsche Bank one of the most reckless banks around.
- kbenson 7y agoReckless? Loaning hundreds of million to the same people that just refused to pay you back the last few hundred you lent them, after they refused to pay back other backs before that, is the investment strategy of the future! /s
- manishsharan 7y agoI do not want to sound like a nay sayer but which responsible enterprise CIO would put their stack on Google Cloud. They have a well deserved reputation for being unresponsive and opaque and downright irresponsible with their customers' infrastructure.
- fasteo 7y agoNot that I want to defend Google or anything, but there are some impressive customers here [1] [1] https://cloud.google.com/customers https://cloud.google.com/customers
- thestepafter 7y agoAt some point the discounts offered to use the platform are too good to pass up. Doesn’t mean the support is good.
- askytb 7y agoThat list is probably the exact list of google customers that get any real support from google
- ehsankia 7y agoAnyone can get Google support with Google One [0] for as low as 2$ a month (along side 100GB of storage). The issue is people expect free products they haven't paid a penny for to have live customer support, which doesn't make much sense at the billion user scale. [0] https://one.google.com/ https://one.google.com/
- tonyedgecombe 7y agoIn my experience their customer support is poor even if you are a paying customer. It's cultural and it goes right to the top, they don't like interacting with people.
- dnautics 7y ago
- murat124 7y agoGCP I'd say could worth definitely tens of billions, but not hundreds.
- lern_too_spel 7y agoThe thing that has confused most of the commenters here is that Google Cloud contains both GCP, which is a dumpster fire, and GSuite, which is probably very profitable.
- nexuist 7y agoNot one mention of AWS. http://paulgraham.com/submarine.html http://paulgraham.com/submarine.html
- pointytrees 7y agoI hadn't read this submarine article before. This just blew my mind. I've got so many ideas for promoting my side business now.
- ignoramous 7y agoThe content farms (and Wikipedia) are modern day version of the print publications. Wouldn't it be ironic if pg was paid by a PR firm to write this piece? :D
- ocdtrekkie 7y agoOn an aside, Paul Graham clearly saw influencer marketing coming in his final paragraph.
- ddebernardy 7y agoThe essay is from 2005. Internet marketers were seeing that trend in the run up to the dot com bubble. And porn sites were seeing it even earlier. (Internet marketers were learning from the latter at the time.)
- beambot 7y agoGoogle Cloud is worth $225B and Waymo is worth $100B [1], so the rest of Alphabet is worth less than $500B in market cap? The math doesn't add up. [1] https://www.cnbc.com/2019/09/27/waymo-valuation-cut-40percent-by-morgan-stanley-to-105-billion.html https://www.cnbc.com/2019/09/27/waymo-valuation-cut-40percen...
- leoh 7y agoIt's actually consistent. The point here is that Google Cloud is undervalued, hence the high buy rating with a target of $1.6k. That would imply a market cap of $~1.1 trillion, meaning that the worth of the rest of Alphabet (sans Cloud/Waymo valued @ $335B) would be $775B.
- helpPeople 7y agoWhen we say "undervalued", you mean compared to competitors? When the tech bubble bursts, either everyone gets bailed out, and it does become worth 200B. Or we are going to find out much of this tech money was speculation. What's hard about running a server farm? Does it lend to this valuation?
- SpicyLemonZest 7y agoI'm not sure what "speculation" is meant to imply here. Deutsche is explicitly giving a speculative valuation here; they speculate that Google Cloud will reach $38 billion of revenue in 2025. But that's not some pie-in-the-sky impossible dream; AWS brought $25B (and operating income of $7B) last year. There are two direct responses to your last question: all parts of running a server farm are hard, and a cloud platform is more than just a glorified server farm.
- wolco 7y agoThe valuation doesn't add up. At 38B revenue we can assume 12B operating income so 20x profit. But your telling us today it is worth 225B not in 2025?
- lacker 7y agoI was working at Google when AWS launched in 2006. The internal message was, we don't want to build a competitor. We have the technology to compete in this area, but it is fundamentally a low-margin business, whereas reinvesting in our core business is high-margin, so we should keep our infrastructure to ourselves. I wouldn't say the Google strategy was wrong per se - their stock has about 10x'd since then. But it's interesting to see how much things change over time.
- frostyj 7y agoI thought margin on the cloud business is pretty high...
- IB885588 7y agoIt is, but that wasn't anticipated at the time and Amazon didn't reveal its margins until much later.
- chillydawg 7y agoIt is today, but it won't last. As automation tooling gets better the barriers to entry drop and competition kicks in and lowers prices. You can see it already: Aws are constantly lowering their prices. It's not just to be nice, they're competing hard.
- tonyedgecombe 7y agoI suppose it depends on the amount of lock-in they can achieve, if it's hard to move from one provider to another then that will keep margins higher.
- solatic 7y agoCore infrastructure may or may not be low margin (traffic rates are nearly pure margin designed to create a moat and may or may not eventually be challenged by regulators as anti-competitive; it remains to be seen). But the lion's share of cloud margin comes from value-added managed services e.g. AWS Lambda and GCP PubSub, which are exceedingly more expensive than their underlying infrastructure but not nearly so expensive as to justify small companies hiring FTE to manage open-source equivalents. And there aren't nearly enough cloud players to justify competition building out competing implementations for, say, the Lambda API, with the sole exception coming to mind being competing object storage providers implementing the S3 API. Multi-cloud isn't a myth, but it's pretty close. It requires lots of discipline that most customers won't have. The smart money is on cloud providers improving their margins, not shrinking them.
- michalu 7y agoThis only means that Deutsche Bank is long on Google. 99% of these analyses are extremely biased and purposeful. I'm not trying to peddle "banks are evil" it's normal, it's how this business works. I worked in a leading asset management firm and never met a truly rich analyst. Usually bureaucratic employees nobody at the trading desk takes seriously.
- jkaptur 7y agoYou can search for "Chinese Wall" in the context of banks for more context on this.
- sidcool 7y agoHow much are AWS and Azure worth?
- outside1234 7y agoMore. A lot more. Azure is growing 20 points faster than GCP and from a much higher base too (and I will point out that it is in Microsoft's DNA to run this sort of business, unlike Google's).
- ehsankia 7y agoHow is it in Microsoft's DNA? They've always run the software, not the hardware. And for Azure, they just took all their Office customers and rebranded them as "Azure" customers, pumping their cloud numbers.
- mattlondon 7y agoI think the point was that Microsoft has typically been very present in "enterprise" - lots of sales people in lots of industries with lots of connections and lots of experience making the sales and doing the deals. Google less so. The hardware is just the hidden infrastructure that businesses don't really care about as long as it meets the SLAs, like I don't care about what the physical building materials are when I go and buy groceries or get my hair cut so long as the building meets it's SLAs (which for a building is I guess not falling down when I am inside it etc) I just want the service.
- ehsankia 7y agoThat's fair. Their sales team and the relationships they had made over the years is definitely a huge part of their success transitioning.
- tyingq 7y agoThey know how to sell to old stodgy Fortune 500's. Google is excruciatingly awkward in the room with that group. Amazon is in the middle.
- swarnie_ 7y agoWorking as a consultant in Europe. Almost every business i walk in to has "something" in Azure (AD/SSO/Compute). 50-70% have "something" in AWS. Honestly under 10-15% have Google cloud products. I work in the ERP segment so i like to think i experience a wide range of companies / cultures / budgets.
- gok 7y ago"The unit could report compound annual growth of 55% between 2018 and 2022, and reach annual sales of about $38 billion by 2025, the analysts wrote." I'm curious how they're making basing these predictions since Google Cloud revenues aren't currently reported.
- deleted 7y ago[deleted]
- electriclove 7y agoHow much are their shares of SpaceX worth?
- justicezyx 7y agoSo my realization after the years have been these: * Cloud margin is very high, using IBM Orale and so on, aka the "old guards" (as said by Andy Jassy: my favorite tech executive by a big margin, got to mention this as a fan boy), as the comparison. * Cloud is the foundation of the next generation of developer platform, being irrelevant in this market is detrimental to Google. Although that was not as obvious to Google as Browser. But the metaphor is obvious now. * Cloud is enterprise oriented, an area that both Amazon and Google were vastly behind Microsoft at 2006. Microsoft then already had a top-tier relationship with enterprise customers. Amazon was way earlier in realizing that, but Google was at least maybe 5 years behind. Diane Green's joining symbolizes the inception of the changing perception, but I'd say Diane's execution is poor (Dianne seems very distracted to me, during their time in Google).
- petercooper 7y agoAnd yet I still don't trust Google not to "sunset" services on a whim (despite being an almost $1 trillion business) so I'd rather stick with AWS.
- verdverm 7y agoGoogle is dumping money into their enterprise programs. They hired some experienced people to run it. Their offerings are soooo much better quality than AWS. Try getting a GPU vm with a local SSD on AWS, does not exist... In GCP I can set custom values for CPU, MEM, GPU, SSD. Try to ssh to a machine, and then one without a public network connect. Google is the only provider with a good portal to their partner program. They can actually communicate and we now have a dedicated account rep.
- sieabahlpark 7y agoThey're good until you get automatically banned for some reason and there is zero people you can contact to fix it.
- tpmx 7y agoMaybe don't run your critical service on a consumer google account that you're also doing shady stuff with?
- verdverm 7y agoI have people I can call, we have a business account. We are going to be upgrading soon to a special partner account that gives us an enhanced portal / cloud console to make managing our clients' accounts much easier. We migrate companies from AWS to GCP. If anyone is interested, please reach out. Happy to provide reference accounts.
- tpmx 7y agoOr they could just go visit https://cloud.google.com/support/ https://cloud.google.com/support/ themselves.
- redredrobot 7y ago> a GPU vm with a local SSD on AWS, does not exist I'm pretty sure that's not true. I believe you can get V100s or T4s with local NVMe SSDs.
- purplezooey 7y agoIf only Google could say the same about their investment in MapR.
- onlyrealcuzzo 7y agoLet me get this straight. Wasn't Waymo valued at $210Bn like 5 months ago? Cloud is $225Bn. Google has $117Bn in cash. It's total market cap is $839Bn. That means the rest of Google is worth $287Bn. Really?
- leoh 7y agoSee https://news.ycombinator.com/item?id=21159401 https://news.ycombinator.com/item?id=21159401