This earnings season, all eyes are on cloud revenue growth
AI computing demand is generating huge revenue streams for hyperscalers, but the market is closely watching the pace of growth, which is slowing.
This week, we’ll get an update on how many billions the cloud giants pulled in last quarter. AI has created an insatiable hunger for more cloud computing, and Amazon, Google, and Microsoft are racing to serve up computing capacity as fast as they can build the massive new data centers needed to catch up with demand.
As a result, the tens of billions of revenue that these tech titans are pulling in keeps going up.
At the same time, their customers are struggling to figure out a viable business model for the AI services they’re developing, and chatter about a possible AI bubble is getting louder.
That means as these tech giants report earnings this week, investors will be scrutinizing more closely how much money these cloud computing businesses are generating, and comparing the pace of growth.
Last quarter, Amazon CEO Andy Jassy tried to explain his company’s AWS cloud unit’s relatively slow revenue growth of 17.5% to analysts, saying that a small number of huge customers tend to spend in bursts, which will result in uneven growth. But overall, Jassy was bullish on the cost- and energy-efficient Trainium chips that Amazon is filling its data centers with.
Microsoft will update investors on Azure’s growth, its flagship cloud business and part of the “intelligent cloud” unit, which includes public, private, and hybrid server products and cloud services. Last quarter, Azure had revenue growth that was the envy of the industry, increasing 39% year on year. There was so much demand, the company had a backlog of $368 billion in signed contracts.
While smaller than Amazon or Microsoft, Google Cloud revenue grew a healthy 31.7% year on year. Google has recently been pitching its own custom chips to customers, putting it head-to-head with Nvidia.
