Cloud computing drives massive growth for big US tech firms


  • TECH
  • Monday, 30 Oct 2017

Amazon Web Services is still delivering far more revenue than any of its peers. — Reuters

SAN FRANCISCO: Amazon.com Inc, Microsoft Corp, Alphabet Corp’s Google and Intel Corp are all putting their chips on the cloud computing business, and it is booming.

All four companies posted stellar quarterly earnings on Oct 26, showing the strength of the shift in corporate computing away from company-owned data centres and to the cloud.

Microsoft's Azure business nearly doubled, with year-over-year growth of 90%. The company does not break out revenue figures for Azure, but research firm Canalys estimates it generated US$2bil (RM8.48bil) for Microsoft.

“The move to the cloud was one we felt Microsoft could always benefit from, and they’re showing us that they can,” said Kim Forrest, vice president and senior equity analyst at Fort Pitt Capital Group, a portfolio management firm.

Highlighting the quarter for Microsoft was a deal securing retailer Costco as an Azure customer. That came just two months after the close of Amazon’s acquisition of grocery chain Whole Foods, which has heightened unease among retail and e-commerce companies about working with Amazon, said Ed Anderson, an analyst with Gartner.

Tim Green, analyst with the Motley Fool, said Amazon could find it needs to make changes at some point at Amazon Web services. "Spinning off AWS at some point down the road might become necessary to prevent an exodus of customers," he said.

Amazon Web Services is still delivering far more revenue than any of its peers. For the quarter, AWS raked in nearly US$4.6bil (RM19.51bil) – a year-over-year increase of 42%. AWS may have missed out on Costco, but the company secured deals with Hulu, Toyota Racing Development, and most notably, General Electric.

Google Cloud Platform landed deals with the likes of department store retailer Kohl’s and payments processor PayPal. Like Microsoft, Alphabet does not break out revenue for Google Cloud Platform, but Canalys estimates the business generated US$870mil (RM3.69bil) in the quarter, up 76% year-over-year.

Google Chief Executive Officer Sundar Pichai said Google Cloud Platform is a top-three priority for the company. He said Google plans to continue expanding its cloud sales force.

Canalys estimates the cloud computing market at US$14.4bil (RM61.08bil) for the third quarter of 2017, up 43% from a year prior. Amazon holds 31.8% of the market, followed by Microsoft at 13.9% and Google with 6%, according to Canalys' estimates.

The “cloud market will keep growing faster than most of the traditional information technology segment, as the market is still in the developing stage,” said Daniel Liu, research analyst with Canalys.

Reflecting the overall growth of the market was the strong performance by Intel, which sells processors and chips to cloud vendors. In July, Intel launched its new Xeon Scalable Processors, which drove 7% year-to-year growth for the company's data centre group.

The big three cloud vendors also benefit from the decision by many enterprises to build their applications using more than one cloud vendor. Retailers Home Depot Inc and Target Corp, for example, told Reuters they use a combination of cloud providers.

“Our philosophy here is to be cloud agnostic, as much as we can,” said Stephen Holmes, a spokesman for Home Depot, which uses both Azure and Google Cloud Platform.

Some analysts expect cloud services growth to slow over time as competition increases.

Amazon, for instance, has said that price cuts and new products with lower costs on average are a core part of its cloud business. Additionally, Amazon Web Services saw usage growth outpacing that of revenue growth, said Amazon Chief Financial Officer Brian Olsavsky.

“Going forward, cloud services will become more of a commodity, and the prices will quickly compress,” said Adam Sarhan, CEO of 50 Park Investments, an investment advisory service. “For now though, it's a great business with plenty of room for all to grow.” — Reuters

Subscribe or renew your subscriptions to win prizes worth up to RM68,000!

Monthly Plan

RM13.90/month

Annual Plan

RM12.33/month

Billed as RM148.00/year

1 month

Free Trial

For new subscribers only


Cancel anytime. No ads. Auto-renewal. Unlimited access to the web and app. Personalised features. Members rewards.
Follow us on our official WhatsApp channel for breaking news alerts and key updates!
   

Next In Tech News

Exclusive-US SEC has pushed deadline for Musk to respond to Twitter inquiry settlement offer, source says
MobiKwik IPO gets bids worth $4.7 billion as investors bet on fintech growth, listing gains
Turkey fines Google $75 million for violating competition law
Broadcom hits trillion-dollar valuation on lofty forecasts for AI demand
US reaches preliminary deal with Bosch for $225 million in chip grants
‘Astro Bot’ wins highest award at Oscars of video games
Tales of 19th-century AI: Don’t fall in love with a singing robot
Poland's CD Projekt releases Witcher IV trailer
Creator of ‘The Last Of Us’ reveals new sci-fi game
Nearly half of US teens are online ‘constantly’, Pew report finds

Others Also Read