Google’s search for non-ad revenue puts spotlight on cloud, Pixel

NEW YORK: The business now represents about 13 percent of Alphabet's total revenue, compared with 10 percent a year earlier.

That may not be a big jump but definitely shines a light on Google's efforts to cut down its dependence on revenue from advertising, where it competes with Facebook Inc.

"(Google) is doing a good job, a much better job in diversifying revenue than Facebook is," said analyst James Wang of ARK Investment Management. "We think that is quite an impressive achievement."

Alphabet does not break out revenue contribution within the "Other Revenue" segment. But analysts have said that cloud is the most prominent among the category's clutch of businesses.

To be sure, Google's cloud venture is still much smaller than market leader Amazon.com Inc's Amazon Web Services and Microsoft Corp's Azure. But Google is investing heavily.

"In Q1, our largest growth in headcount and capital expenditure was in cloud," Google Chief Executive Sundar Pichai said on a call with analysts on Thursday.

Amazon's cloud business grew 43 percent to $3.66 billion in the first quarter. Microsoft's cloud unit grew 93 percent.

"We believe Google will continue to gain traction in the cloud market, and when combined with Google Play and sales of Google's hardware products, we see Google's 'other' revenue growing 38 percent to nearly $14 billion in 2017," Morningstar analyst Ali Mogharabi wrote in a client note.