As Google Cloud continues to grow far more rapidly than much-larger competitors Amazon Web Services and Microsoft, it’s demonstrating it has the critical mass in products, partners, and industry-specific expertise to battle those cloud giants on equal and in some cases superior footing.
Last month, Google Cloud CEO Thomas Kurian told me that his company’s full commitment to the enterprise cloud began in earnest only four years ago, making it what he called “the new kid on the block.” As such, Kurian said, the big issue in 2023 is not so much about the big cloud deals of the past several years but rather the new ones for which Google can compete on equal terms with its two larger rivals.
If we look at the cloud-revenue growth rates across those three companies over the past five quarters, it becomes clear that while those arcs are moderating for all three, Google Cloud has been able to sustain the highest rate by far.
| 2021 Q4 | ’22 Q1 | ’22 Q2 | ’22 Q3 | ’22 Q4 | |
| Microsoft | 32% | 32% | 28% | 24% | 22% |
| AWS | 40% | 37% | 33% | 28% | 20% |
| 46% | 44% | 36% | 38% | 32% |
To be sure, Google Cloud by all accounts should have a higher growth rate than Microsoft and AWS because those latter two are so much larger and therefore have much bigger revenue bases from which to expand. For calendar 2022, Microsoft Cloud revenue was about $102 billion, AWS about $81 billion, and Google Cloud $26.3 billion.
But, even acknowledging that relative size disparity, look at the precipitous drop in growth rate for AWS from Q4 of 2021 to Q4 of 2022: from 40% to 20%.
If you look at that trend line — particularly bearing in mind that AWS CEO Adam Selipsky was no doubt using every possible carrot and stick on his global sales org to finish the year with as much revenue as possible — is it reasonable to think that something in Q1 will change so that AWS can pull out of this declining-growth tailspin?
If so, what would that catalyst be?
- More pressure from sales managers? I doubt that’s humanly possible.
- A sudden burst in customer spending? Not seeing any indication of that.
- Businesses suddenly realizing AWS has a huge product set? Nah, I think that’s pretty well established.
- Parent company Amazon competing with AWS customers and prospects in various industries?? Whoops!
I’ve looked pretty hard for such rationale, but can’t find it. That certainly doesn’t mean AWS won’t find some way to reaccelerate its revenue pace in Q1 — but, with those numbers above as a very objective frame of reference, I just don’t see what that reacceleration spark would be.
Meanwhile, the top executives at both Microsoft and Alphabet — the parent of Google Cloud —used their Q4 earnings calls to evangelize for AI with a zeal I have not seen from either since the early days of the cloud.
Both Satya Nadella of Microsoft and Sundar Pichai of Alphabet spoke at great length and with fervent intensity about the power of artificial intelligence (AI) to unlock spectacular new capabilities. No doubt AWS is putting great energy into AI as well, but based on Amazon’s Q4 earnings call, it’s not in the same league as the other two.
We’ll dig into that AI rapture in more detail over the next week or so.
Final Thought
Google Cloud continues to distinguish itself from Microsoft as well as from Amazon in its ability to leverage its consumer businesses to inform, influence, and enhance its enterprise business, and Kurian has said that’s become a major advantage for his company.
And that’s one of the primary reasons why I believe that as we’re witnessing a bit of a cooling-down period in the greatest growth market the world has ever known, Google Cloud is quietly making the case that “the new kid on the block” is going to continue posting exceptional gains relative to its larger competitors.
