It's evident we're witnessing a re-inflection point đ in the cloud industry, as we analyze the recent quarters. The significant growth in revenue and customer commits across all hyperscalers indicates that the cloud is healthy and growing. Organizations across industries continue to invest in public cloud, pointing to its broader adoption.
Letâs look at a combined picture of key hyperscalers' commits and revenue to understand the nuanced dynamics.
đ¶ Industry's Gradual Rebound and Accelerating Growth
The last two quarters of 2023 showed signs of a rebound for the cloud industry. All three hyperscalers reported larger deal sizes and growing longer-term customer commitments. It also seems that the cloud is becoming a primary battleground in the AI race, with all hyperscalers determined to capture significant AI market share.
đŒ Cloud Revenue Backlogs: A Foundation for Future Growth
The revenue backlogs are now ~2X their cloudsâ annual run rates, offering a solid base for near-term revenue growth.
Amazon Web Services (AWS): $90Bn annual revenue run rate, with $155.7Bn in cloud commits.
Microsoft Azure: Passed a $55bn revenue run rate in June, with an estimated $111Bn in commits (see my previous posts for calculations).
Google Cloud: $33Bn annual run rate with $74.1Bn in commits.
đ Revenue Growth + Commits Trends
AWS's revenue growth rate last year was notably slower compared to its competitors, but its backlog shows an interesting growth trend. In just 9 months, AWS added $33Bn in commits, which is like adding an entire Google Cloud annual revenue to their revenue backlog.
This expansion may compensate for the slower growth rate, especially when considering the larger base from which AWS is growing. It gives AWS a cushion, and its sheer market size may allow it to maintain a competitive advantage.
MSFT Azure's stellar revenue growth rate, paired with fluctuating commitments, suggests a strategic focus on aggressive market penetration and expansion. Microsoft leverages AI, its partner ecosystem, and enterprise market presence. âMicrosoftâs efforts to commercialize its AI products are gaining momentum, with the recent introduction of Copilot driving significant customer and partner interest,â according to Canalys.
Google Cloudâs consistent growth in commitments and recovery in growth rate shows a steady strategic approach, focusing on areas of strength such as data analytics, AI/ML, etc. This suggests that specialization and innovation can lead to strong growth even in a competitive market.
đ The Rising Importance of Partners and Marketplaces
As hyperscalers continue to aggressively grow and compete, the industry trend will depend on the breadth of services they offer. Starting with AI, but including marketplace offerings, partner ecosystems, and industry-specific solutions.
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