Google CEO Sundar Pichai: Partnering Efforts 'Paying Dividends'

Google executives, confident they have a highly differentiated cloud with capabilities well-suited for enterprise customers, are now focused on growing that business with deep investments in go-to-market efforts.

"We're investing in in-house strengths and partnering, and those things are beginning to pay dividends," Google CEO Sundar Pichai said Monday in parent Alphabet's second-quarter 2018 earnings call.

Pichai, answering an analyst's question, said he sees the overall cloud industry at an inflection point.

[Related: Google Continues Cloud Momentum In Q1 As Internet Giant Lands More Enterprise Customers]

"That's why it feels far from a zero-sum game," Pichai said. "All the major players are definitely seeing traction."

Enterprises typically stay committed to a computing architecture for as long as they can, Pichai said, "because change is hard."

But with the cloud, the benefits of adoption are so clear, that "over time there's a tremendous cost to your business of being on the wrong architecture, especially if you need to digitally transform yourself," he said.

For that reason, the question of cloud adoption is on the minds of executives across the enterprise, including CEOs, he said.

And it appears clear that "businesses are going to embrace multiple clouds over time too," Pichai said.

With more than 20 years of experience deploying the technologies that underlie its cloud, Google will continue "thoughtfully gaining strength and coming in to do it for the long term," Pichai said.

Pichai noted that G Suite, Google's cloud-based office productivity suite, is increasingly becoming an option that satisfies the needs of large enterprises.

Google is "seeing increasingly big companies take on the migration" to G Suite, he said.

But beyond that, Pichai wouldn't divulge specifics on the cloud business or upcoming products, citing the fact that Google's premier cloud conference, NEXT, was set to kick off the day after the earnings call.

Overall, Alphabet saw 26 percent year-over-year growth, solidly beating expectations for the quarter ending June 30.

Earnings per share of $11.75 beat Thomson Reuters estimates of $9.59, sending Alphabet stock up 3 percent to $1,243.20 in after-hours trading.

Alphabet also included in its financials an adjusted EPS figure of $4.54, which took into account the $5 billion fine the European Union handed down last week for what European regulators described as anti-competitive practices around its Android smartphone business.

Of Alphabet's $32.7 billion in quarterly revenue, all but $200 million came from the Google subsidiary, which grew by 25 percent.

The segment Google calls "Other Revenues"—in which it bundles revenue from cloud, its Play store and YouTube—contributed $4.4 billion.

Alphabet CFO Ruth Porat told investors that Google's cloud division accounted for the largest source of growth in headcount. The majority of new hires were engineers and in sales roles, she said.

With the cloud capabilities Google has built around security, apps, machine learning and analytical tools, "our view is we're addressing a rapidly growing market with the core pillars needed to win," Porat said.

But the theme remains the same: Google needs to "further build-out go-to-market capabilities and ensure we have the functional requirements that enterprise customers deserve," she said.

Pichai noted, also in response to a question, that Google Cloud has made gains in heavily regulated industries like health care and finance, as opposed to the tech-focused industries that provided an early customer base.

Certifications Google Cloud has earned, and features created to serve those industries, are "clearly starting to have an impact on GCP and G Suite," PIchai said.