Market value: $721.8 billion
Alphabet (GOOGL, $1,005.18), parent of the Google search engine, didn’t invent the cloud. It was merely the first to see the need to combine virtual operating systems in which any program can run; distributed computing that could share a program load among many machines; and massive scale, based on open-source software and cheap hardware, to run its business.
These three ideas – scaled to the largest possible degree, and connected by fast fiber-optic cables – make up the cloud.
Alphabet now has a network of 15 cloud data centers; nine in the U.S., and the rest spread among countries including Chile, Finland and China.
Google put more than $13 billion into capital spending during 2017, including $4.3 billion alone in the fourth quarter, to support a business with revenues of over $110 billion in 2017. Most of that comes from advertising on Google services, but it also includes Google Cloud, which resells this cloud capacity as infrastructure, platforms and applications.
Google only got serious about reselling its cloud in 2015, under Diane Greene, a co-founder of VMware (VMW), which developed much of the virtual machine technology on which clouds are based. The bulk of Google’s capacity still is used to run its advertising-supported search business, which netted $73.7 billion last year after costs for buying traffic. In fact, in 2017, digital ad spending outpaced that of TV, at $209 billion worldwide.
Google may be the ultimate cloud play. It is in every area of cloud – hardware, software, services, commerce and resale. The recent court decision saying it violated Oracle’s (ORCL) Java copyright in writing Android will hurt the stock, but the company remains strong.
