In a digital nod to Charles Dickens and A Tale of Two Cities, Oracle and Amazon’s AWS currently represent for the cloud industry the best of times and the worst of times, and the summer of hope paired with the winter of despair.
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Now, perhaps it’s a bit harsh to use terms such as “worst” and “despair” in connection with AWS, which in its most recent quarter posted revenue of $21.35 billion. But the companies that make it into my Cloud Wars Top 10 rankings are—fairly or unfairly—subject to more-rigorous standards of performance than companies in other industries because they’re the primary engines of the greatest growth market the world has ever known.
In every other industry on the planet, quarterly revenue of $21.35 billion and a growth rate of 16% would be seen as phenomenal, breathtaking, unfathomable. But in the Cloud Wars, we try to always keep a deep sense of perspective, which is why my analysis of Amazon’s Q1 earnings came under this headline: AWS Q1 Growth Plummets to 16%, Way Below Microsoft Cloud’s 22%.
That’s because a year ago in Q1 of 2022, AWS posted a growth rate of 37%, meaning that in just 12 months its revenue momentum tanked from 37% to 16%. If that’s not a sign that customers are far less enchanted with what AWS is offering, and of their diminished faith in AWS’s ability to be their #1 strategic cloud partner for the decade, then I don’t know what is.
Put it this way: If you were placed in charge of a business growing at 37%, and one year later you had to tell the board that under your leadership that very same business is now growing at 16%, would you expect:
(a) Thunderous applause and a big fat raise
(b) Some tough questions about that performance relative to those of competitors; or
(c) To be told you have 6 months to rebuild at least some of the momentum you’d been given just 12 months earlier?
And yes, let’s talk about competitors. For the 3 months ended March 31 of this year, Microsoft Cloud posted revenue of $28.5 billion, up 22%. A year earlier, Microsoft Cloud generated revenue of $23.4 billion, up 32%.
So yes, Microsoft Cloud’s growth rate moderated over those 12 months from 32% to 22%, which is understandable as its massive business gets even bigger. There’s also the issue of most customers cutting back on spending in these strange economic times.
But take a look again at the comparison: AWS from 37% to 16%, and Microsoft from 32% to 22%. For AWS, that comparison looks even worse when you factor in that Microsoft Cloud is now one-quarter larger than AWS ($28.5 billion versus $21.35 billion).
What about Google Cloud? A year ago in Q1, it grew 44% to $5.82 billion, and in Q1 of this year it grew 28% to $7.45 billion. That performance, along with its aggressive Generative AI moves, led me to elevate Google Cloud to the #2 spot on the Cloud Wars Top 10, pushing Amazon down to #3. You can read all about that in Google Leapfrogs Amazon to Become #2 on Cloud Wars Top 10.
And then there’s Oracle—and here’s where things get really interesting:
One year ago, for its fiscal Q4 ended May 31, Oracle Cloud revenue was $2.9 billion, up 19%. But for this year’s fiscal Q4, Oracle Cloud revenue was $4.4 billion, up a whopping 54%. For full details on that, please see Oracle Crushes Q4 and Remains World’s Hottest Major Cloud Provider.
Before looking at those results relative to each other, let me trot out my standard statement about disparities in revenue levels: yes, I understand that the bigger your revenue base is, the harder it is to deliver high growth rates. But as I’ve noted, life in the Cloud Wars is clearly a momentum play and the red-hot company of a year ago (AWS at 37%) is not necessarily the heartthrob of today (AWS at 16%).
So here’s how those growth numbers from a year ago and then from the most-recent quarter stack up:
- Microsoft: 32% versus 22%; latest quarterly cloud revenue $28.5 billion
- Google Cloud: 44% versus 28%; latest quarterly revenue $7.45 billion
- AWS: 37% versus 16%; latest quarterly revenue $21.35 billion
- Oracle: 19% versus 54% (not a typo); latest quarterly cloud revenue $4.4 billion
The Case For Oracle Moving Up To #3
While there is no question that AWS created the cloud-infrastructure category and is the market-share leader and will probably be so for years to come, customers today are more interested in the software side of the cloud as the transformative power they need to become data-driven digital businesses. And Oracle without question continues to be one of the world’s top enterprise-software companies, particularly as it has built a portfolio of cloud services spanning LOB applications with its Fusion line plus NetSuite for SMBs; cloud-native databases and analytics; and industry-specific solutions that are being blended with the companies mainstream apps.
Clearly, the acquisition a year ago of Cerner has goosed Oracle’s growth numbers, but I have two thoughts on that:
- If growth is a measure of success and momentum in the eyes of customers—and I am certain it is—then every other Cloud Wars Top 10 company is free to go out and acquire away.
- Oracle CEO Safra Catz has masterfully used recent quarterly earnings calls to showcase how Oracle’s cloud business excluding Cerner is growing at 30% or more—meaning that Oracle’s cloud success is clearly a combination of booming organic business plus Cerner.
Finally, the arc of history has not been kind to AWS and its position on the Cloud Wars Top 10. When I started these weekly rankings six years ago, AWS was #1. Then Microsoft’s fast-growing cloud business—including but by no means limited to Azure—pushed it over AWS into the #1 spot.
And several weeks ago, as noted above, I moved Google Cloud over AWS into the #2 spot.
I have great respect for AWS and fully believe it will be a power player in the cloud industry for the long term. But growth rates—particularly relative to what competitors are doing—provide a clear indicator of customer perceptions and customer choices. And if you look at those comparative growth rates from above, the inescapable conclusions are that (a) AWS is waning as a customer favorite and (b) the other three—and particularly Oracle—are on the rise.
These rankings are closely followed by C-suite executives that make up today’s executive buying committee because of the customer-focused nature of the rankings. When the rankings change, they take notice.
“What the Cloud Wars Top 10 ranking does is cuts through the noise of all the marketing, all the hype, all the demand techniques and it focuses the lens from the customer’s point of view.” Tony Uphoff, 4X CEO and Acceleration Economy Practitioner Analyst.
“The Cloud Wars Top 10 ranking is a way for me, as a CIO, to go back to my board and say these are the companies that are making a difference, these are the companies that are innovating and if we want to be innovative in our industry we should partner with these companies,” says Wayne Sadin, CIO at PriceSmart and Acceleration Economy Practitioner Analyst Advisory Board member.
Manny Korakis, another Acceleration Economy analyst and CFO, said he uses the ranking to help him evaluate how the big cloud players can help his company better engage his customers. “What’s the opportunity that I have in the future, either for an efficiency play or some innovation that I can turn around and use in my customer-facing products?” he says.
Recently, I’ve spoken and written in detail about the criteria I use for the Cloud Wars Top 10 rankings. Right now, every single one of those criteria tell me that Oracle is making a very serious run at the #3 spot.
And if the world’s hottest major cloud vendor (that would be Oracle) can maintain the market momentum it has right now, and if AWS continues to see its growth rates tumble far out of proportion with what’s happening with the other hyperscalers, then another big change is on the way in the Cloud Wars Top 10.