AWS, Microsoft, Google Continue to Invest in Cloud as Demand Grows in AI Era

So far in 2024, there has been no slowdown at all for the big three cloud computing giants as Amazon, Microsoft, and Google are all generating more money in the cloud than ever before.

The three cloud vendors recently reported earnings results, with all of them extending multiyear streaks of continued revenue growth. On April 25, both Google and Microsoft reported results. Google Cloud revenue came in at $9.57 billion in Alphabet's first-quarter fiscal 2024 for a 28% year-over-year gain. Microsoft's cloud revenue was $35.1 billion, up 23% year-over-year.

Rounding out the big three on April 30, Amazon Web Services (AWS) reported revenue of $25 billion, a 17% year-over-year gain.

"There is much for cloud providers to be cheerful about, with the three market leaders all seeing their growth rates increase substantially over the last two quarters," John Dinsdale, chief analyst at Synergy Research Group, commented. "Going forward, we forecast that there will continue to be strong annual growth, with the market set to double in size in four years."

Microsoft Azure Growing Thanks to Big Deals

Artificial Intelligence (AI) is a key driver of growth for all three of the big cloud providers, as it was over the course of the previous year.

While AI is leading to new demand in the cloud, it is also leading to bigger deals from customers for Microsoft.

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"Overall, we are seeing an acceleration in the number of large Azure deals from leaders across industries, including billion-dollar-plus, multiyear commitments announced [in April] from Cloud Software Group and the Coca-Cola Company," Microsoft CEO Satya Nadella said during the company's earnings call. "The number of $100 million-plus Azure deals increased over 80% year over year, while the number of $10 million-plus deals more than doubled." 

Google Presses Forward on What's Next in the Cloud

During Alphabet's earnings call, CEO Sundar Pichai also talked a lot about the power of AI in driving the cloud forward.

In addition, he noted the long list of new features and services that Google Cloud has rolled out recently.

"In cloud, we have announced more than 1,000 new products and features over the past eight months," Pichai said. "At Google Cloud Next, more than 300 customers and partners spoke about their generative AI successes with Google Cloud, including global brands like Bayer, Cintas, Mercedes Benz, Walmart, and many more."

Cost Optimization No Longer the Major Driver to Cloud

At AWS, executives for the last several years have been saying cost optimization was driving the move to the cloud. That's no longer the case in 2024.

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Amazon CEO Andy Jassy said during his company's earnings call that companies have largely completed the lion's share of their cost optimization and have turned their attention to newer initiatives.

"Before the pandemic, companies were marching to modernize their infrastructure, moving from on-premises infrastructure to the cloud to save money," he said. "The pandemic and uncertain economy that followed distracted from that momentum, but it's picking up again — companies are pursuing this relatively low-hanging fruit in modernizing their infrastructure."

The continued demand is also driving the need for AWS to spend more money to build out data centers and additional capabilities.

"We expect the combination of AWS' reaccelerating growth and high demand for genAI to meaningfully increase year-over-year capital expenditures in 2024, which given the way the AWS business model works is a positive sign of the future growth," Jassy said. "The more demand AWS has, the more we have to procure new data centers, power, and hardware."