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Cloud Tech Giants Face Increased Revenues Amid Slowing Growth

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Cloud giants Amazon Web Services (AWS), Microsoft, and Google Cloud Platform (GCP) are thriving even as the ongoing COVID-19 pandemic has caused other industries around the world to grind to a halt.

While COVID-19 continues to disrupt communities and economies around the world, there are signs that it will have a mildly positive impact on the cloud infrastructure services market. No doubt that the pandemic brings some trouble to cloud providers, but in these uncertain times, public cloud provides flexibility and a haven for enterprises struggling to maintain normal operations. It is the reason why the cloud market is growing currently and has a bright future ahead. The revenue numbers released by the top three cloud providers also justify the same fact.

Slow growth for cloud giants, but revenue steadily increases

AWS Q2 Report Card

In Q1 2020, AWS passed the $10 billion milestones, even as growth continued to slow down. In Q2 2020, AWS growth fell to 29% — the first sub-30% growth rate ever since Amazon started releasing AWS numbers. The growth rate has fallen steadily for the past two years, but COVID-19 looks to be accelerating this trend.

AWS is the cloud computing market leader, ahead of Microsoft Azure and Google Cloud. High-percentage growth cannot continue unabated. For a market leader, growth of 29% in sales to $10.8 billion is still impressive. Although, it is certainly not the good news Amazon anticipated. AWS accounted for about 12.1% of Amazon’s total revenue for the quarter, which is on the lower end.

Microsoft Azure Q4 Report Card

Analysts expected Microsoft to earn $36.5 billion in revenue and report earnings per share of $1.37. The performance has easily surpassed expectations, suggesting some (but not all) units are thriving even during the pandemic.

Even though cloud growth was already slowing down for the company, a 47% revenue increase for Azure is still bad news. The figure has fallen steadily: 76% in Q2 2019, 73% in Q3 2019, 64% in Q4 2019, and 59% in Q1 2020. It rebounded slightly to 62% in Q2 2020 but returned to 59% in Q3 2020. Looking at Azure’s size, the growth slowdown is healthy, but the pandemic appears to be accelerating this trend too.

Google Cloud Q2 Report Card

For Q2 2020, Google Cloud — which includes Google Cloud Platform (GCP) and G Suite — brought in $3.007 billion, up 43% from $2.1 billion of last year and $2.77 billion in Q1 2020. The growth was led by GCP infrastructure offerings, and the data and analytics platform.

The steady march toward the growth with cloud business helped Alphabet tackle the challenging quarter. Revenue from the cloud arm helped the company overcome ad revenue setbacks across Search and YouTube.

Putting it all together

In the COVID-19 era, work, learning, and day-to-day affairs are increasingly carried out online. Shouldn’t that mean more cloud usage and thus more cloud revenue? Yes, and it does, but that does not necessarily translate to more cloud revenue growth for the three tech giants.

Cloud revenue growth was already in decline. It declined further in the first full quarter under the COVID-19 pandemic because some businesses cut down on their cloud usage. While some others ramped up the usage, everyone is trying to cut costs. Businesses figuring out as to what cloud services are critical to their operations is a good thing. It is a very healthy exercise for businesses to examine their costs, so they only pay for what they use.

Amazon, Microsoft, and Google do not look concerned. If the growth suddenly flatlined, that would be a different story. Growth may have slowed to its lowest rate yet, but Q2 2020 was still the best quarter for cloud revenue to date. No one in their right mind will ever complain about these revenue figures in such challenging times.

Amit Suhag
Amit Suhaghttp://cloudmanagementinsider.com/
Amit Suhag is the Senior Editor and Cloud Evangelist at CMI. He is a tech writer covering history, news, recent developments, events to everything around cloud technology. All opinions are his own.

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