As Wall Street focuses on cloud computing this week, Google outperformed its competitors in growth, a very important sign to investors that the Internet company is gaining traction in the synthetic intelligence space.
Googles The cloud business, which incorporates each infrastructure and software subscriptions, grew 35% year-over-year to $11.35 billion within the third quarter, an acceleration from 29% within the prior period.
Amazon Web Services, the still market leader, grew 19% to $27.45 billion, meaning the corporate is greater than twice the dimensions of Google Cloud but growing only about half as fast. Runner-up Microsoft said revenue from Azure and other cloud services rose 33% year-over-year.
Five of the six trillion-dollar technology firms reported results this week, including the AI chip maker Nvidia as an outlier. Amazon, Alphabet and Microsoft all the time report around the identical time, giving investors an outline of how the cloud wars are evolving.
“While Alphabet has often been criticized as Johnny-One-Note for its reliance on digital advertising, Google Cloud's rapid growth has begun to diversify the company's revenues,” analysts at Argus Research, who recommend buying the stock, wrote in an article report from Oct. 31.
The cloud has long been a money sink for Google, but that's now not the case.
Google reported a cloud operating margin of 17% within the third quarter, after turning a profit for the primary time last 12 months. It “significantly exceeded expectations,” Melissa Otto, head of technology, media and telecommunications sector research at Visible Alpha, said on CNBC this week. She said she wasn't sure the corporate could maintain that level of profitability.
The opposite is true at Amazon, where nearly all of its overall profits have long been based on AWS.
AWS' third-quarter operating margin was 38%, which analysts at Bernstein called a “whopping” number. Executives have been cautious about hiring and have dropped less popular AWS services. Additionally, in early 2024, Amazon prolonged the useful lifetime of its servers from five to 6 years, a change that increased its operating margin by 200 basis points, or 2 percentage points.
Microsoft This week the corporate began providing investors with more detailed details about its Azure public cloud. In the past, when the corporate reported Azure revenue growth, that number also included sales of mobility and security services in addition to data analytics software Power BI. Microsoft, the lead investor in ChatGPT developer OpenAI, is getting an enormous boost from AI services.
“Demand continues to exceed our available capacity,” Microsoft Chief Financial Officer Amy Hood said on the corporate’s earnings call.
While Azure growth will moderate somewhat in the present quarter, Hood said, it should pick up in the primary half of 2025 “as our capital investments result in an increase in available AI capacity to meet more of the growing demand.” .”
Amazon is experiencing an identical dynamic.
“I think pretty much everyone has less capacity than they demand these days, and it's really chips in particular that are the area where companies could use more supply,” Amazon CEO Andy Jassy said on his company's earnings call .
In order to cut back the load, Amazon sometimes uses its own processors along with Nvidia's graphics processors (GPUs). Jassy said customers are showing interest in Trainium 2, the corporate's second-generation chip for training models.
“We reached out to our production partners several times to produce much more than we originally planned,” he said.
Google is now within the sixth generation of its own custom tensor processing units for AI. CEO Sundar Pichai told analysts that he frolicked with the TPU team.
“I'm really excited about the forward-looking roadmap, but all of this allows us to both plan for the future and really drive an optimized architecture for it,” he said.
Microsoft introduced its own AI chip within the cloud, Maia, a 12 months ago. The company has began using Maia chips to power its own services, but has not yet made them available for rental to customers, a spokesman said.
Analysts at DA Davidson said in a note this week that they don't see this as a battle Microsoft can win in its battle against Amazon and Google. You have a neutral rating at Microsoft.
oraclewhich is usually ranked fourth amongst U.S. cloud infrastructure firms, is anticipated to report quarterly leads to December. In his last report oracle Cloud infrastructure revenue rose 45% to $2.2 billion, compared with 42% growth within the previous quarter.
Oracle recently partnered with its three larger cloud competitors to make its databases available on their services. This move, which Chief Executive Officer Larry Ellison said in recent earnings calls, “will accelerate the growth of our database business in the coming years.”
REGARD: Otto: The scale of Alphabet's cloud business and spending on AI infrastructure can be critical
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