Google's Cloud Platform Could Be Bigger Than Initially Thought

In a new report, Macquarie analyst Ben Schachter discusses Alphabet Inc GOOGL’s major push into cloud computing. Macquarie believes Google’s GCP is a good position to make an aggressive run at cloud market leaders Amazon.com, Inc. AMZN’s AWS and Microsoft Corporation MSFT’s Azure.

When it comes to computing, storage and networking, Macquarie believes that GCP is already on-par with Azure and AWS. Schachter expects that Google will attempt to push machine learning as its true competitive advantage.

“Google will attempt to use its strengths to differentiate on the data analysis layer and the potential to capture and leverage sizable data from IoTs customers,” Schachter explains.

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Macquarie expects that the public cloud space will become intensely competitive in coming years, and Microsoft needs to go ahead and make it the company’s primary focus. Microsoft’s server and storage businesses are two of the primary reasons why it significantly lags AWS’s margins.

Macquarie maintains its Outperform rating on Alphabet and has an $870 price target on the stock.

Amazon was one of the top performers in the market last year on the strength of AWS, but the stocks of all three cloud leaders have lagged the S&P 500 so far in 2016.

Disclosure: the author holds no position in the stocks mentioned.