Third-quarter financial results are coming out in a few weeks, and I’m predicting that Microsoft and Google Cloud will again grow much more rapidly than AWS as the cloud-infrastructure giant’s growth rate will remain mired at 12%.
In fact, I expect that Google Cloud will once again grow more than twice as fast as AWS and extend the trend that resulted in these calendar-Q2 numbers: Google Cloud grew at 28% versus AWS’s 12%, while Microsoft came in at 21%.
For Q3, I expect the following growth numbers: Google Cloud up 27% to $8.75 billion, Microsoft up 21% to $31.1 billion, and AWS up 12% to $23.0 billion.
As I’ve mentioned before, here at Cloud Wars I put a great deal of emphasis on growth rates because the rapidly changing nature of customer needs means that the cloud vendors that have served customers well in the past might not necessarily be their best choices for current and future requirements.
So these growth rates and projections reveal a great deal about customer confidence in the future potential of each cloud vendor, particularly in today’s world as the shift to digital business has triggered enormous changes in how companies operate has been compounded by the generative artificial intelligence (GenAI) phenomenon.
Whenever I offer these growth-rate analyses, I always receive some feedback from readers —mostly employees of AWS — who feel the need to explain to me that it’s easier to grow at a relatively high rate if your revenue base is relatively small. That feedback is 100% correct — but I believe that in this particular case, it’s also being used to rationalize market dynamics that show customer sentiment moving to other vendors.
In this particular case, I also believe that while size definitely matters, it is not the determining factor of growth rates and/or who’s hot and who’s not. Here’s what I mean:
- The foundation. As I’ve pointed out many times, the growth rates for each of these three companies — Microsoft, Google Cloud, and AWS — have moderated over the past couple of years due to (a) each company’s revenue base getting larger and (b) the uncertain global economic environment.
- Which one of these is not like the other? But last quarter, the growth rates for two of the three stabilized: Google Cloud at 28% for the second straight quarter, and Microsoft from 22% to 21% over those same two quarters. For AWS, the rate of growth went from 16% to 12%. So as the other two leveled off, AWS continued to slide.
- Riddle me this. And if anyone believes that size is the ultimate determinant, then please explain to me how Microsoft’s cloud revenue, which is more than 30% larger than that of AWS, is growing almost twice as fast as AWS? How can that be?
- The Wild Card. And let me toss a wild card into the mix: Oracle. While its 12-month cloud revenue of about $5 billion is much, much smaller than that of the other three (Microsoft $120 billion, AWS $90 billion, Google Cloud $34 billion), Oracle’s cloud-infrastructure business grew at 63% over the 12 months ended May 31. Setting aside that big revenue gap, why would any infrastructure customer pick Oracle Cloud — a relative newcomer —when they could pick any of the three well-established and massive incumbents?
Only in the Cloud Wars could a company with the extraordinary performance level of AWS — a growth rate projected to be 12% generating quarterly revenue projected to be $23 billion — be relegated to a distant fourth place on a growth chart. But as the saying goes, past performance is no guarantee of future results.
And at least for now, it looks like AWS’s three primary competitors — Microsoft, Google Cloud, and Oracle — are all outperforming AWS in grabbing the attention of customers looking to make major bets on how to create their digital futures in the new world of GenAI.
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