Rejoice, it's cloud results season, once more.

It is firmly cloud results season once again, and both Google and Microsoft posted their numbers for the last quarter. Interestingly the press in the US and Europe have portrayed this as “a tale of two clouds” to quote Radio5 this morning, and the FT reporting Microsoft’s “edge in AI”. Personally I think this is hyperbole, and both companies reported strong results - but it’s interesting to note how much sentiment is now placed upon “cloud”, with Google beating expectations in basically all other segments (including ‘all up’), and still taking a $100Bn share price dip. That will, of course, bounce back. Easy money for the swing traders.

So, then: numbers. Alphabet reported nearly $77Bn for the quarter, with cloud specifically making up $8.4Bn of that - marginally missing expectations of $8.6Bn and causing the sentiment gap - despite 22% growth YoY in cloud (including slower growing Workspace). This is up from $6.9Bn in the same quarter last year, so is still pretty hearty growth by any definition. Once again, they were profitable, contributing $266M back to the group, albeit that’s a 3% margin so isn’t yet fully firing on all cylinders. In the earnings call, Sundar and Ruth pitched a lot of positivity and the usual “momentum” in cloud, and there was huge trumpeting of advances in AI alongside “durably reengineering our cost base to create investment capacity” in that area. Customer optimisation of spend was explicitly noted as a headwind to cloud growth.

They also mentioned Gemini, the new LLM coming soon (perhaps this year) to replace and upgrade Google’s AI capabilities. What could that mean? Well, check out the leaked pics here of Stubbs - indicating a way to build applications from a prompt - the ultimate in “no code” engineering, and perhaps a real indication that conversational programming is coming to a developer suite near you in 2024…?

Microsoft up next. It was Q1 results for team Nadella. They also reported strong growth all up - reaching $56Bn for the quarter, and showing a better than expected growth rate of 29% for Azure specifically (dollar value not formally shared). The ‘Microsoft Cloud’ segment generated nearly $32Bn, up 24% YoY. Whilst this does include a lot of other items so isn’t directly comparable to Google, it is fair to say it’s a great result at that scale and Microsoft are going from strength to strength. ‘Intelligent Cloud’ which is a narrower segment subset, reported a chunky $24Bn, up 19% YoY.

There was a ton of AI conversation here as well, with Satya hailing the “age of AI” and Amy Hood noting it was “primarily AI” driving new business. The Microsoft spin of having the most regions evolved also, now to “we have our AI services deployed in more regions than any other cloud provider.” In fairness, they did show further improving cloud margins, driven by 365 and Azure, hinting that AI add-ons could be helping there - and specific reference to “higher-than-expected AI consumption”. This is a profitable unit, no doubt.

I also thought the 21,000 Azure Arc customers being called out was interesting too - Arc being the hybrid/multi-cloud offering they provide. There was formal confirmation if you’d missed it that the Activision Blizzard deal is done in the gaming segment, after two years of legal wrangling, and a tidy $75Bn price tag.

What about AWS, you might fairly ask? Well, the juggernaut reports their numbers on Thursday night, so I’ll try and share a quick summary on Friday. What is new in AWS land is they’ve released the “Sovereign Cloud”, following the other vendors in creating an EU only series of data centres, guaranteeing data residency - alongside the residency of those AWS employees and contractors that operate the data centres. Useful for those European nations who still don’t trust the Americans, albeit I’ve never particularly been a believer in this approach outside of national security related applications.

p.s. thanks to deepai.org for today’s 10 second image creation with the prompt “happy stock market traders celebrating good results”... Horrifying.