Google CEO: Channel Will Be Investment Focus In 2019

Google CEO Sundar Pichai told investors Monday that the hyper-scale cloud provider will focus its investments this year on go-to-market efforts, including through its channel partners.

Google believes it offers a comprehensive and well-differentiated set of cloud services, and now needs to pour money into scaling those products "both in terms of direct sales and our channel partnerships," Pichai said during parent company Alphabet's Q4 earnings call.

Pichai also credited outgoing cloud leader Diane Greene for transforming Google into an enterprise-focused organization.

[Related: Google's Cloud Surge Anchors Q3 Revenues As Internet Giant Bets Big On Multi-Cloud Plan]

"I want to thank Diane Greene for her leadership over the last three years," Pichai said.

Google's fast-growing cloud is supported by "a robust enterprise organization," Pichai said. "This was not the case just three years ago."

What Greene and her team accomplished was phenomenal, Pichai said, but the VMware founder's work is now done and she's handing the reigns to incoming Google Cloud CEO Thomas Kurian, an Oracle veteran.

That change in leadership has been a "well-planned transition," Pichai said. Greene and Kurian "together planned 2019."

Google Cloud is focused now on winning Global 5,000 companies as it continues "to invest in and expand our sales and distribution channels," the Google CEO said.

Increases in Google's operating expenses in 2018 were primarily driven by staff increases. The majority of new hires were engineers and product managers, and the "most-sizable headcount increases were in cloud for both technical and sales roles," said Alphabet CFO Ruth Porat.

Google doesn't break out financials for its cloud division. The Mountain View, Calif.-based Internet giant's "other" accounting category saw $6.5 billion in revenue in the fourth quarter, Porat said, "fueled by cloud, hardware and Play."

She told investors that "cloud does continue to deliver sizable revenue growth driven by GCP and GCP does continue to be among the fastest-growing businesses inside Alphabet."

Last year, Google Cloud Platform more than doubled the number of million-dollar deals and the number of multi-year contracts it entered. The G Suite productivity software platform in that period passed 5 million paying customers.

Google has also seen a "nice uptick" in deals worth more than $100 million, Porat said.

Google has proven its "ability to win very large customers." Continuing that trend across every major vertical is "definitely something we want to focus on," Pichai said.

As far as technological capabilities, Google's CEO sees a "clear strength in data management and analytics"—features that are winning retail and media customers.

Google is also focused on its cloud's capabilities as an application platform, he said.

"Our ability to help customers deploy cloud-native applications has been a differentiator," he said.

Another differentiator has been Google's multi-cloud posture for supporting other public providers and on-premises implementations. That "turns out to be very important for global multinational companies," Pichai said.

Google continues advancing its machine-learning technology to drive differentiation across all of its business, "like cloud and hardware," Pichai said.

In 2018, Google "set out to bring benefits of AI to everyone through our products," the CEO told investors.

Google continues to invest in data center construction and expansion as part of its long-term strategy to advance machine learning capabilities, and support both its cloud and search businesses.

"AI is helping us drive our mission forward at a scale we couldn't imagine," he said.

Alphabet's overall business saw $136.8 billion in revenue in 2018—up 23 percent. Revenue for the fourth-quarter that ended Dec. 31 of $39.3 billion was up 22 percent year-over-year.

As always, that revenue was almost entirely from the Google segment, which brought in $39.1 billion for the quarter.

Despite healthy growth, Alphabet stock tumbled in after-hours trading because of pressures in its advertising business.

Alphabet shares closed at $1,141.42 for Monday before falling more than 3 percent to $1,103.50 at the time of this article's publication.