While Amazon Web Services has first mover advantage when it comes to building a compute and storage cloud, it would be a mistake to believe that the division of the world’s largest online retailer can rest on its laurels. AWS has to work hard every day to make its cloud cheaper and better, and that is because both Microsoft and Google are gunning for it.
And the threat is ever-present, and has been for the past several years, which is why you see the AWS share of the cloud revenue stream hovering around a third. At some price and some level of function, customers will move, and moreover, there are customers who love the Microsoft’s Windows Server platform, its development tools, and its application software and there are other customers who think Google has the smartest infrastructure on the planet and is the safest place to invest in the future of compute and storage.
No matter what your own preferences may be, what can be said for certain is that AWS, Microsoft, and Google have built the largest platforms that the Earth has ever seen and the largest platform businesses as they sell slices of it for companies to use to run their own businesses. Moreover, what we also know for sure is that the intense competition between these three cloud builders, who are also hyperscalers running applications at scale in their own right, is good for the market, push up capabilities and pushing down prices more than otherwise might be the case.
GPU compute capacity excepted, of course, as high demand is still chasing short supplies. But this will normalize at some point, fear not. This is what markets do.
Rather than look at these companies separately, as we might otherwise do, we decided to look at them at the same time as they all reported their revenues for the fourth quarter of 2023. We have been watching AWS like a hawk since founding The Next Platform nearly a decade ago, but never got around to peeling apart the financials of Microsoft and Google, which have only in recent years started talking about their cloud businesses as their revenues in this area became significant enough that they have to. We should have been doing this all along, of course. The best time to do anything is ten years ago; the second best time is right now.
With a few years of trend data in hand and the competition from Microsoft and Google coming on strong, now is actually a perfect time to compare and contrast the Big Three in cloud. So let’s get on with it.
CLOUD 1: AMAZON WEB SERVICES
Way back in February 2019, we asked the question: When Does AWS Break Through $100 Billion? And based on a couple of different scenarios, some of which were utterly ridiculous (such as the growth rates AWS enjoyed back in 2018 continuing out into the future), we thought in the final analysis that AWS would break through $100 billion in annual sales by its 20th anniversary in 2026 and quite possibly before.
It turns out that this will happen quite a bit before that, here in 2024 in fact. And a lot of that will have to do with the surge in interest in Generative AI and the dearth of GPUs outside of the big clouds and hyperscalers.
