The IaaS earnings reports are in for the big 3 cloud vendors, so it’s time for another round of cloud market share analysis at Stratusly.
Following the 3 quarterly earnings calls, AWS remains the clear-cut leader with $3.66 billion in quarterly revenue, up a whopping 46% from a year earlier. “This space is an oligopoly,” says Trip Miller, founder of Gullane Capital Partners “No one else of any meaningful size outside a handful of major players is getting into it because they can’t afford to get into it.” He may be right.
Before we jump further into the earnings reports, it’s important to note that Amazon is the only one of the big 3 cloud service providers to disaggregate cloud from their overall revenue. During its call, Amazon reported operating margin of 24.3% for the AWS division and announced plans for new cloud data centers in China and France. They also boasted that NASA recently leveraged their services to “deliver the highest resolution video ever broadcast live from space,” as reported by CNBC.
$3.66 billion in revenue may seem impossible to catch up to, but that sure isn’t stopping Microsoft and Google from trying. Microsoft reported earnings of $6.8 billion for its Intelligent Cloud division, but this includes both Azure and several other commercial cloud businesses, like Office 365. The company did say Azure sales rose 93% and that their overall commercial cloud business (including Office 365) earned roughly $3.8 billion in the quarter. It’s hard to say exactly how much of that is Azure, but it’s certainly a significant chunk and those growth numbers are likely to be a cause of concern for AWS.
Google still isn’t separating earnings from Google Cloud with the rest of the business, reporting quarterly revenue of $24.5 billion, of which $21.4 billion came from advertising. They did state that their non-advertising revenue grew 50% YoY to $3.1 billion, and its safe to say a substantial chunk of that comes from Google Cloud.
Google Cloud chief Diane Greene recently told a group of tech leaders that her company has a “good shot” at surpassing Amazon Web Services within 5 years. On Sunday, she reiterated to a gathering of executives at the Forbes CIO Summit that Google is well positioned to catch up to and even surpass AWS in public cloud by 2022. Based on these earnings reports, she has her work cut out for her.
“I think we have a pretty good shot at being No. 1 in five years,” says Green. “I actually think we have a huge advantage in our data centers, in our infrastructure, availability, security and how we automate things. We just haven’t packaged it perfectly yet.”
While both Google Cloud and Azure earnings appear to be growing exponentially, recent studies have found that AWS remains far and away the leader in public cloud, maintaining 40% market share. That market share has remained relatively constant throughout 2016, as Google and Microsoft struggle to gain ground on the 800lb gorilla. In fact, Microsoft, Google, and IBM, the next 3 largest cloud providers, have grown their market share only a combined five percent during the same period. A sobering number.
“While a few cloud providers are growing at extraordinary rates, AWS continues to impress as a dominant market leader that has no intention of letting its crown slip,” says John Dinsdale, chief analyst and research director at Synergy Research Group. It’s hard to argue with that. Although Microsoft and Google appear to be growing at a faster rate (relatively), they have a very long way to go before they can be considered true competitors to AWS.