It’s easy to make some generalizations about the public cloud market. Amazon sits at the top, Microsoft comes in second with Azure, and number three is almost an afterthought. For the sake of argument, let’s say it’s Google. All three companies recently put out earnings, so how much money is the cloud making?
Let’s start with Amazon, because they make it the easiest. They easily break out their earnings for AWS, and the results are impressive on two levels. In terms of revenue, the division brought in $3.5 billion in Q4. The company as a whole made just under $44 billion in revenue, so it’s not a huge overall slice. What is amazing is how much of Amazon’s operating profit comes from AWS. The company traditionally operates on pretty thin margins, especially on retail. Overall they recorded a $1.3 billion operating profit. But AWS account for over 70% of that. 70% of profit coming from 8% of overall revenue is a crazy cash cow for Amazon.
Google makes things rather opaque with their earnings. Their cloud division is lumped into the vaguely named “Other Revenue”, which includes their hardware sales, G-Suite, and cloud. Overall they reported $3.4 billion in revenue. It’s a good bet that hardware didn’t play too big of a role in those figures. Google Daydream, Pixel phones and Google Home are fine products, but hardly sales or margin blockbusters. Adding in G-Suite really muddies the waters, because while Google Apps for Business and Education have a lot of marketshare, I have no idea how much revenue this generates. Still Other Revenue is growing, up 62% on the year. This signals that at least part of that revenue, and I’m willing to bet it’s cloud, is still nascent enough to put up a lot of growth.
Microsoft also makes it hard to follow the money. Their Intelligent Cloud division generated a ton of revenue in Q4, $6.9 billion, up 8% from last year. Seems like they’re the big player in the cloud space. The only problem is this division includes Windows Server, which I’m sure is responsible for the bulk of that revenue. You can tell, because while they don’t give a specific number, Microsoft did reveal that Azure revenue grew 93% on the year. Adoption seems to be going strong, as compute use also doubled since last year. But that kind of product growth didn’t move the overall needle much for the division, so Windows Server still seems to be doing the heavy lifting in Redmond.
The biggest challenge for Google and Microsoft going forward isn’t how to grow, the cloud migration trend is only gaining steam. Their challenge is how to dislodge AWS as the default choice when people think of the public cloud. Google is the big underdog here, but its being aggressive. Snapchat just agreed to pay them $400 million a year to be their backbone. I image they’re aggressively pursuing other deals. But I think it speaks volumes that only Amazon seems confident enough in their earnings to post their numbers in the raw.