Clouds in the Forecast: Tech Giants Position for Future Success
It’s the height of earnings season—and that means cloud leaders Amazon, Microsoft and Google provided the latest look at the state of the industry. Amazon and Microsoft are leading the charge and wowed with strong earnings reports – Amazon shattered expectations with earnings per share at $7.09, 50 percent higher than what analysts were expecting, and Microsoft even briefly passed the trillion-dollar valuation. For both, the largest growth area is cloud computing. But, as Microsoft and Amazon move ahead, their peers fall further behind – like Google’s cloud which trails significantly.
Amazon and Microsoft flaunted cloud growth numbers during their earnings calls, -- Amazon Web Services (AWS) reported a 41 percent revenue growth in cloud – which accounted for 10 to 13 percent of Amazon’s total sales for Q1, or from $5.44 billion a year earlier to $7.7 billion. Microsoft Azure’s growth accelerated 73 percent in Q1, and in total, all of their Intelligent Cloud offerings up 22 percent to $9.7 billion. While Google’s small share was the fastest growing, up 83 percent on a small base from $1.2 billion to $2.3 billion, there are cracks in its foundation that shouldn’t be dismissed.
Google’s parent company Alphabet missed on both revenue and earnings estimates, and shares responded by dropping more than 7 percent after the earnings report. Its new multi-cloud services platform and various AI and security solutions could potentially challenge AWS and Azure with time, but today it trails in total cloud spend and operates at a fundamental disadvantage to its peers.
Microsoft has channel history – they’re used to partnering and making strategic and successful investments. And Amazon, since its inception, has proven itself to be ahead of the curve when it comes to investing in new technologies and developing strategic partnerships and facilitating growth. Google has no history of channel relationships or partnerships. They’re late to the party. As these big cloud vendors seek to maintain their rapid growth, there will be a battle for enterprise customers – and Amazon and Microsoft have longstanding relationships – with partners and customers – that will keep them on top.
Though the biggest focus of cloud growth is on these three companies, one trailing company that is worth mentioning is Oracle. When they reported their Q3 fiscal results on March 14, total revenue was flat. However, they have begun to break into the cloud computing competition – with their cloud services and licenses support revenue increasing. Oracle’s database leadership does not mean that their cloud offerings will be successful. Plus, their core applications are moving to applications such as Workday, SAP HANA, Microsoft AX, etc. Their customers want to shift the leverage paradigm to “neutrality.” That is an issue for Oracle. While Google needs to develop new, better partnerships in order to be successful, Oracle needs to modernize theirs.
With the cloud becoming increasingly central to today's businesses, Amazon and Microsoft are poised to extend their gains as market leaders. Challengers will find that they’ve missed a window of opportunity.
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