In spite of an impressive performance that has helped Google grow over the last year by a handsome margin of 26 percent, the tech giant is yet to catch up with its closest competitor Amazon Web Services.

Cloud Platform Gains Good Momentum

Over the years, Google has demonstrated its muscle in the domain of machine learning, data center operations, and computing. These features have been leveraged by Google to build its cloud business strength by strength and gained a commanding position to grow year after year.
 
This has reflected in recent acquisitions of key accounts that include big names such as Price waterhouse Coopers and Domino’s Pizza among others. Recent trend of financial establishments adopting cloud computing is certainly going to boost customer base of Google Cloud Platform.
 
Another encouraging development is opening of a promising avenue that has contributed to the high-tech cloud Artificial Intelligence solutions. One of the most interesting developments is use of data analytics and machine learning for improving services of Air Asia.

Increased CapEx

All this development and incremental business has also contributed to higher capital expenditure on account of huge capital investment for improvement of a large spectrum of facilities, data centers and purchasing production resources. The growth in capital investment is almost double than that of last year’s.
 
It is quite obvious that the CapEx has exhibited a significant rise since development of machine learning services requires significant compute power that adds to the costs. The investment is however, more than justified because Google Inc and its parent company Alphabet have gained amazing ability to expand product base in the domain of machine learning with cutting edge compute power.

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Value Of AI And Machine Learning

Google has understood that its future growth drivers are none other than artificial intelligence and machine learning. Google is therefore strategically focusing on these two businesses and it is quite obvious from the spending patterns.
 
In the year that has just gone by, Google overtook Facebook, Microsoft, and Apple in terms of investment in Research and Development. The major portion of this expenditure can be attributed to machine learning and AI.
 
Google has been seriously thinking about ways to offset rising expenditure associated with two of its main divisions namely, search and ad businesses. The expenses are in the form of costs of acquisitions. The main reason for developing AI and machine learning businesses is nothing but significantly lower investment potential of these businesses.

Some of the recent developments also indicate Google’s growing interest in Artificial Intelligence and machine learning. The latest acquisition of a startup company Deep Mind is an important proof to this. Cost of this acquisition was a whopping six million dollars.
 
By launching two programs that are purely directed at finding opportunities to buy new startups in the field of machine learning and AI, Google has underlined its interest in these technologies. These funds are named as Google Assistant Investment Program and Gradient Ventures.

Mergers and acquisition strategy of Google is also significantly focused at boosting its presence in cloud segment to gain an edge over the nearest rivals Azure from Microsoft and AWS from Amazon. These are some of the major investment areas that contribute to Google’s growing capital expenditure.

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Revenue Generators

Major revenue earner for Google has always been its ad business. However recent developments indicate that Google cloud would also be contributing to Google’s earnings in a major way. Google Cloud Platform has been growing with leaps and bounds and is poised to challenge other web service providers including Microsoft and AWS.
 
Machine learning and Artificial Intelligence will be needed to fuel cloud growth because role of these technologies to support hybrid cloud offerings is unquestionable.

Cloud objectives

Google is confident about being on the right track in terms of its cloud business with greater focus on multi-cloud offerings. Google believes that customers must be given choice to shift between providers and has accordingly concentrated on multi cloud. This has assured market alignment as well because no company would be interested to be a victim of vendor lock in.
 
There has been a considerable growth in Google’s investment as far as its direct sales business and partnership deals are concerned. Investing in cloud business requires a major CapEx for procuring cost intensive hardware equipment and upgrading the data center resources. More and more infrastructures and facilities of data centers will have to be either built from the scratch or will have to be acquired across various global locations.
 
There are positive signs that the hardware investment decisions of Google have been bearing fruits. This is evident from the encouraging performance of the recent products launched by Google.

Takeaway

Google has significantly improved its cloud footprint by winning new customers on a global perspective. There is also an encouraging development as more and more companies in financial sector are looking at cloud hosting as the next infrastructure resource of the future.
 
There is an urgent need to strengthen its AI and ML portfolios and Google is moving in the right direction by investing in Research and Development. Machine Learning must be supported by huge compute power and therefore the expenditure for constructing new data centers and building new facilities are entirely justified.