What AWS, Google and Microsoft results have told us about the cloud market

Tom Wright looks at the implications of the big three's earnings reports

The public cloud market has just become ever so slightly easier to gauge this week, with Google offering a first look at numbers of its cloud.

This means the big three cloud vendors - Amazon Web Services, Microsoft and Google - now all release some indication of the size of their businesses, albeit not by exactly the same metric.

Comparisons are helped by the fact all three vendors usually report numbers within a week of each other, sometimes even on the same day.

Very top-line highlights of the latest releases show growth of varying degrees across the board:

• AWS - revenue grew 34 per cent, to $9.95bn (£7.62bn)
• Azure - revenue grew 62 per cent
• Google Cloud - revenue grew 53 per cent to $2.6bn

But there are still some hindrances. Microsoft has never reported Azure revenues or growth in currency, so we don't know exactly what base this growth is coming from.

And despite giving the best indication yet of its cloud business' size, Google grouped in Google Cloud Platform with products such as G-Suite.

It seems safe to assume, however, that AWS remains the global leader by market share. Its annual run rate is now at $40bn - four times that of Google Cloud, even with other elements of the Google business included.

But AWS, which has just reported Q419 numbers, has not seen its rate of growth increase since Q218, some 18 months ago (see graph below).

Amazon says that this is not an issue, instead encouraging analysts to look at its growth in absolute rather than relative terms.

In the last quarter AWS grew $2.5bn which, given its substantially larger base, likely equates to more money than Azure's growth.

Amazon CFO Brian Olsavsky re-emphasised this point, which was previously made by AWS CEO Andy Jassy, on an earnings call last week.

He also refuted one analyst's suggestion that AWS' growth was slowing because of Azure's progress, claiming that quarterly movements are "going to be a little bumpy".

"We grew from a $30bn revenue run rate at the end of 2018 to a $40bn revenue run rate at the end of 2019, so we continue to be happy with our top-line growth, in dollar terms as opposed to percentages," he said.

"We had a larger dollar increase in revenue both year over year and quarter over quarter."

"As far as [competition] is concerned, we think that we start with a very big lead in this space because of our many years of investment, not only in capacity, but also in services and features that we provide to customers. We've learned from customers."

Azure, meanwhile, pleasantly surprised many by returning to accelerated growth after two years of slowdown. It's worth noting that AWS also saw its growth slow in 2016 (see above) before speeding up again a couple of quarters later.

On the quarterly earnings call for Microsoft's Q2, CFO Amy Hood attributed the return to growth to new workloads being spun up in Azure, rather than workloads being migrated to the public cloud.

"One of the important parts that we started to see this quarter was not only good workload migration work and strong growth in the optimisation of the workloads already running, but also some of these new PaaS workloads like Synapse and Cosmos DB and Arc are really starting to add some momentum in that part of the stack as well, which is important," she said.

For Google, its cloud progress will be easier to assess over the rest of this year and beyond, now that there is some official data as a starting point.

CEO Sundar Pichai stressed that the growth in GCP is "meaningfully higher than that of cloud overall", and accelerated from 2018 to 2019. Google has also made good on its pledge to snap up high-profile enterprise-focused executives, with Thomas Kurian coming in as CEO and, more recently, Cisco's global channel boss Nirav Sheth joining the cause.

Changing market dynamic

Data published by Canalys yesterday had Google's cloud infrastructure revenue at $1.8bn in Q4, which equates to over half of what Google released as total cloud sales.

Growth of 67.6 per cent slated by Canalys is, as CEO Pichai said, higher than the 53 per cent growth which Google published for the whole cloud unit.

AWS still has, as expected, the lion's share of the market - but its share did fall by one percentage point, Canalys said.

Meanwhile Azure's market share was up 3.1 percentage points.

All three vendors now also have on-premise solutions available to link private datacentres to their public cloud.

AWS made its Outposts offering generally available last month, joining Microsoft's Azure Stack and Google's Anthos.

It's worth highlighting Alibaba's significant share of the market as well, although the vast majority of this will be in China.

Alibaba will publish its results next week, although the content of its quarterly reports and earnings calls is usually focused predominately on its huge Chinese e-commerce business.

Finally, it will be interesting to keep an eye on how IBM's cloud strategy plays out this year.

Last week the vendor announced that cloud boss Arvind Krishna would be taking on the CEO role later this year, in a move with an uncanny resemblance to Satya Nadella's rise from Azure boss to chief exec. If Krishna has a fraction of the impact that Nadella has had at Microsoft, his tenure will surely be considered a success.