Why Wiz Rejected the Google Acquisition Offer

Cloud security startup Wiz reportedly rejected Google parent Alphabet’s $23 billion acquisition offer.

Instead, Wiz told employees it will pursue an IPO as previously planned, according to CNBC. The cloud security startup would have been Alphabet’s largest acquisition to date.

Last week, we reported that Alphabet was pursuing an acquisition of Wiz.

Analysts with Canalys said there was good reason for Wiz to reject Alphabet’s acquisition offer.

Wiz's Assaf Rappaport

“Saying no to such humbling offers is tough,” Wiz co-founder Assaf Rappaport wrote in an employee memo reported by CNBC. An anonymous person with Wiz told CNBC that antitrust and investor issues spurred the company to abandon the potential deal.

Neither Alphabet nor Wiz are commenting on the deal falling through.

Wiz: Strong Future Without Google Acquisition

Jay McBain, chief analyst at Canalys, said Wiz rejecting Alphabet’s offer reminds him of when Facebook CEO Mark Zuckerberg said no to $1-billion Yahoo deal and later surpassed a trillion dollars in value.

Canalys' Jay McBain

“Wiz has momentum in an industry growing by double digits (for the foreseeable future) and could leverage public market capital in a way that Google wouldn't provide,” he said.

Matthew Ball, chief analyst at Canalys, said much of Wiz's success has been in the Amazon Web Services (AWS) ecosystem. 

Related:Google Reportedly Pursuing $23 Billion Acquisition of Cloud Security Startup Wiz

“After the $1 billion funding round earlier this year, Wiz is well funded to continue executing its M&A strategy, work towards an IPO and increase its value,” he said.

Asked about the the partner impact from the Google acquisition succeeding, Canalys analyst Peter Bryan, said the close relationship with other cloud providers would have been "too difficult to untangle from an integration point of view."

(Canalys is owned by Informa, Channel Futures' parent company.)

Google completed a $5.4 billion acquisition of Mandiant in September 2022 and combined it with Google Cloud.

Alphabet Reports Strong Q2 Earnings

Also Tuesday, Alphabet reported nearly $85 billion in revenue for its second quarter of fiscal 2024, up 14% year over year from nearly $75 billion and surpassing analysts’ expectations. Profit totaled $23.6 billion, up from $18.37 billion for the year-ago quarter.

Google didn’t address Wiz during its earnings call.

“I'm really pleased with our results this quarter,” said Sundar Pichai, Google’s CEO. “They showed tremendous ongoing momentum in search and great progress in cloud with our AI initiatives driving new growth. Search had another excellent quarter. And in terms of product innovation, we are seeing great progress with AI views. In Q2, cloud reached some major milestones. Quarterly revenues crossed the $10 billion mark for the first time, and at the same time passed the $1 billion mark in quarterly operating profit. Year to date, our AI infrastructure and generative AI solutions for cloud customers have already generated billions in revenues and are being used by more than 2 million developers. As I spoke about last quarter, we are uniquely well positioned for the AI opportunity ahead.”

Related:Wiz Continues Big Growth with Another $1 Billion

Google services revenue totaled $74 billion, up 12% from $66.3 billion year over year. Google search and other advertising revenues totaled $48.5 billion in the quarter, up 14%, led again by growth in retail, followed by the financial services vertical.

YouTube advertising revenues totaled $8.7 billion up 13%, while network advertising revenues totaled $7.4 billion, down 5%.
In the Google Cloud segment, revenues totaled $10.3 billion for the quarter, up 29%, reflecting the first significant growth in Google Cloud Platform (GCP), which was above growth for cloud overall and includes an increasing contribution from AI, and second, strong Google Workspace growth primarily driven by increases in average revenue per seat.