There's a lot of skepticism about Apple's move to ditch AWS for Google Cloud
Justin Sullivan/Getty Images
But Deutsche Bank believes the reality is not quite as momentous as it appears, arguing in a note to investors on Monday that the size and significance of the deal have probably been overstated."One independent check told us that the media is likely misrepresenting what has actually happened and that the dollar amounts being thrown around ($1 billion in AWS spend by Apple, or a $400-$600m deal with GCP) are both 'absurd,'" the note said.Advertisement
Deutsche Bank estimates that Google's Cloud Platform generated $400 million in total last year. So the reported deal size would be exceedingly larger, it noted.
Also, signing up a customer as big as Apple would be a huge shift away from the typically smaller deals Google's Cloud Platform has been signing so far, according to the note. Even some of Google's large enterprise customers seem to be using it only for "small, niche and net new initiatives," it said.
"Some of our industry checks argued that Google is better-positioned downstream in the SMB segment, a view supported by our own Google Cloud Platform customer checks," the report said. "We didn't come across many customers that had 'lifted-and-shifted' their existing IT workloads into GCP."
In any case, Deutsche Bank downplayed the implications of Apple's reported move away from AWS. It suspected that it's more likely that Apple is trying other services to reduce risk of relying on a single platform, while possibly testing data migration ahead of the rumored move to go fully "in-house."
In order to attract more customers, some reports suggested Google Cloud Platform could announce price cuts at this week's NEXT Conference, igniting a full-blown price war against AWS. But Deutsche Bank's note said that's highly unlikely, too, given AWS's history of barely responding to previous Google price cuts, and it's high-margin business model.
"It is ironic that the Street often faults Amazon for not caring enough about profitability yet it is AWS that is running a high-margin business and it is Google and Microsoft that are more price aggressive and (based on our estimates) running unprofitable cloud infrastructure segments," it wrote.
Still, Deutsche Bank pointed out that Google's cloud service, led by star exec Diane Greene, offers a strong developer platform and robust functionalities that make it a clear #3 behind AWS and Microsoft Azure. And given the cloud computing market is still in its infancy, it could soon catch up.
"Google may be lagging at a time when the market is in perhaps year one or two of a 20-year ramp. There is time to catch up," it said.