While analysts were focused yesterday on Google Cloud's revenue shortfall of $0.2Bn, they entirely overlooked the significant $4.3Bn š° surge in its Revenue Backlog (also known as Cloud commits) for the quarter.
A jump of over $4Bn in commits suggests that the slight revenue miss for the current quarter might be a temporary setback. In reality, GCP's performance could be much more robust, because commits represent signed contracts.
š Google Cloud's $64.9Bn commits signal strong growth potential
This quarter's commits: $64.9Bnšŗ
Last quarter's commits: $60.6Bn
āAs of September 30, 2023, we had $64.9 billion of remaining performance obligations (ārevenue backlogā), primarily related to Google Cloud. Our revenue backlog represents commitments in customer contracts for future services that have not yet been recognized as revenueā¦.We expect to recognize approximately half of the revenue backlog as revenues over the next 24 months with the remaining to be recognized thereafter.ā
A 7% increase in commits indicates that companies are investing more and accelerating their spending with GCP.
š” Why Commitments Matter for SaaS Partners
Even amidst the scramble for cost optimization, many enterprises sign multi-year contracts with cloud providers like Google Cloud to secure significant discounts. These can range from millions to even billion-dollar contracts that they must honor to maintain these discounts.
Here's a tip: when these customers purchase third-party SaaS via the Google Cloud marketplace, their spend counts against these commitments.
In essence, they're buying third-party products using funds allocated for cloud services. It's a win-win, shortening procurement cycles from months to sometimes days. Moreover, there's the benefit of streamlined billing ā a single invoice from Google, where third-party products are listed alongside GCP services.
š³ The Google marketplace is expanding swiftly
Growing numbers of cloud commitments are not just impressive figures; they present an opportunity for tech founders and partnership leaders. Are you tapping into it?
If your enterprise hasn't collaborated with cloud hyperscalers yet, you might be missing out on the commits that could aid in scaling your product.
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