Alphabet's Google should disclose enterprise cloud run rate

Amazon Web Services, Microsoft and IBM provide various levels of disclosure about their enterprise cloud businesses. Google's enterprise cloud size remains a mystery. How long can that situation last?

Alphabet's fourth quarter earnings on Monday will bring new reporting that outlines Google's core results as well as side projects called "other bets." Unfortunately, these new reporting segments may not shed more light on Google's cloud efforts for corporations.

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The hyperscale cloud infrastructure players are usually referred to as a big four--Amazon Web Services, Microsoft Azure, Google Cloud Platform and IBM's SoftLayer. There are other key cloud players such as Oracle and Salesforce, but on the infrastructure front it's a race with AWS, Microsoft, Google and IBM.

But here's the catch. Google's cloud run rate remains a mystery. AWS delivered 2015 revenue of $7.88 billion. Microsoft claims to have a commercial cloud annual run rate of $9.4 billion. IBM said its cloud delivered as a service annual run rate is $5.3 billion.

Should Google even be considered a big four player? While Alphabet will break out Google's core results and other bets (projects like autonomous vehicles, drones, Google Fiber and Verily), the Google at Work business will likely fall into the other category in the search giant's results.

In its segment breakdown primer, Google noted the following:

As we discussed on our Q3 earnings call, we'll be adding disclosures for our segments. First, we will disclose our new 'Google' segment which includes our main internet products such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome, Google Play as well as hardware products we sell, such as Chromecast, Chromebooks and Nexus. Our technical infrastructure and newer efforts like Virtual Reality also remain in Google.

Second, our other businesses will be combined and disclosed as 'Other Bets', which includes Access/Google Fiber, Calico, Nest, Verily (formerly Google Life Sciences), GV (formerly Google Ventures), Google Capital, X (formerly Google [X]) and other initiatives.

When Alphabet reported its third quarter results in October, here's an exchange that highlighted the issue.

Justin Post, BofA Merrill Lynch analyst, asked:

We are pretty focused on the cloud over here. Google, we don't have a number, it's in your other revenues. But Amazon's probably $8 billion-plus run rate, Microsoft over $1.5 billion. Just wondering if you can give us any thoughts on your cloud strategy and how you're thinking about using those really strong data center assets.

Sundar Pichai, CEO of Google, said:

On the cloud side, as you observed, it's an exceptional opportunity, I think. It just reflects a secular shift. Every business in the world is going to run on cloud eventually. So, we view it as an amazing opportunity.

We are uniquely qualified to do so. As you pointed out, we have tremendous experiences in running large-scale cloud services. And it's been only in the past two years in earnest we've been taking those assets and serving customers outside. For me, what's exciting is, as I look at new customer adoptions, we're seeing tremendous momentum. We are very competitive in each of those situations. And we are investing a lot and playing for the long term.

Pichai's non-answer doesn't clarify much. Does Google's cloud annual revenue run rate matter? You bet. Enterprises are using Google Cloud Platform for some workloads, but a big bet needs some certainty that the search giant is serious about corporate customers. A run rate disclosure would help enterprises know whether Google should be in the mix in the great infrastructure as a service bake-off.

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