The cloud drove Q1 results for Google, Amazon, and Microsoft (MSFT, GOOGL, AMZN)

Cloud Drives Q1BI Intelligence

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During their earnings calls last month, tech giants Alphabet, Amazon, and Microsoft all acknowledged their cloud computing businesses as catalysts of their Q1 revenue growth.

Alphabet’s revenue grew 22% year-over-year (YoY) to reach $ 24.8 billion in the quarter, with $ 3 billion, or 18% of its Q1 revenue, coming from the segment that houses its cloud business. Amazon’s revenue reached $ 35.7 billion in Q1, with $ 3.6 billion, or 10% of revenue, coming from its AWS cloud segment. Microsoft posted revenue of $ 23.56 billion, with $ 3.6 billion, or 10%, coming from cloud. 

Alphabet, Amazon, and Microsoft may have different core products, but all three tech behemoths benefited from their growing cloud businesses. Here’s a breakdown of each company’s cloud offerings:

  • Amazon is the current leader in cloud service offerings. Amazon accounted for 40% of the global market for public cloud services in the fourth quarter of last year. The Seattle-based company reported $ 890 million in operating income from its cloud business, Amazon Web Services (AWS), which accounted for the majority of its Q1 2017 profits. Amazon is looking to diversify its product offerings and rely less on e-commerce as a main driver of revenue.
  • Microsoft ranks second in the cloud computing market. Microsoft accounted for 11% of the global market for public cloud services in Q4 2016. Its main cloud offerings, Microsoft Azure and the cloud version of Office 365, grew 93% and 45% YoY, respectively. Microsoft is hoping to rely less on personal computer software.
  • Alphabet’s cloud business ranks behind Amazon’s and Microsoft’s. Alphabet accounted for 6% of the global market for public cloud services in Q4 of last year. The company doesn’t break out specifically how much of its cloud business drove revenue, but its “Google other revenues” segment, which includes Google cloud, saw 49% YoY growth in the quarter. Alphabet is seeking to rely less on advertising revenue, which currently accounts for nearly all of it.

Expanding cloud offerings not only helps to diversify revenue sources, it also allows each to capitalize on the growing XaaS (Anything-as-a-Service) market. For example, the IaaS (Infrastructure-as-a-Service) market experienced a 38% YoY growth from 2015 to 2016. Additionally, spending on total cloud infrastructure (public and private), is projected to grow annually at a compound rate of 13% to reach $ 60 billion by 2020, according to the IDC.

The cloud segment will become increasingly important for each of these tech companies as the digital ecosystem moves away from being device-centric and moves towards cloud-oriented solutions wherein products and services can be accessed on a variety of devices from virtually anywhere. This shift will be more pronounced in the years ahead, as consumers and employees seek greater mobility and the Internet of Things brings exponentially more devices into the digital fray.

Cloud computing — on-demand, internet-based computing services — has been successfully applied to many computing functions in recent years. From consumer-facing, web-based productivity apps like Google Docs to enterprise database management suites, the tools businesses rely on are increasingly moving to the cloud.

But developing a cloud strategy is no easy task. Public cloud solutions will likely come to dominate the market over the next decade, but business constraints, such as security concerns and the limitations of existing infrastructure, make it difficult for companies to fully adopt the public cloud right now.

That means that hybrid clouds, in which multiple cloud implementations (including public and private) are connected, will remain popular for the time being, at least until these constraints are addressed. The tech giants that dominate the IaaS market — Amazon, IBM, Microsoft, and Google — are constantly expanding their offerings to address current business constraints as they compete for market share.

BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on cloud computing that:

  • Explains the different cloud computing strategies and benefits of cloud computing.
  • Evaluates key business considerations – security needs, demand predictability, existing infrastructure, and maintenance capabilities – for enterprises choosing between cloud implementations.
  • Provides and outlook for trends and major players in the cloud computing market.

To get the full report, subscribe to an All-Access pass to BI Intelligence and gain immediate access to this report and more than 250 other expertly researched reports. As an added bonus, you’ll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now

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