Performance of the three cloud companies, who laughed and who cried – Byline Network

The three public cloud companies, including Amazon Web Services (AWS), Microsoft, and Google Cloud, announced their quarterly results one after another at the end of last month. Google Cloud outperformed the leading players in growth rate and operating profit ratio. AWS improved operating profit through intensive cost management. Microsoft showed stagnation in its operating profit ratio due to increased investment expenditures in response to service demand from OpenAI, a major customer.

AWS announced in its earnings announcement on the 31st of last month that it recorded sales of $27.452 billion and operating profit of $10.4 billion during the third quarter of fiscal year 2024. This is an increase of 19% and 50% respectively compared to the same period last year.

In its earnings announcement on the 30th of last month, Microsoft announced that it recorded cloud sales of $38.9 billion during the first quarter of fiscal year 2025, a 22% increase compared to the same period last year. Microsoft Cloud is the combined sales of the ‘Intelligent Cloud’ division, Microsoft 365 Commercial, Dynamics 365, and LinkedIn divisions. Sales of the ‘Intelligent Cloud’ division, which includes sales of Azure and other cloud services, recorded $24.1 billion and $10.5 billion in operating profit, up 20% and 18%, respectively, from the previous year.

Google Cloud announced in its performance announcement on the 29th of last month that it recorded sales of $11.35 billion and operating profit of $1.947 billion during the third quarter of fiscal year 2024. Sales increased by 35% compared to the same period last year, and operating profit increased by more than 732% compared to the same period last year.

Google Cloud’s operating profit increases sharply amid strong ‘demand for generative AI’

In terms of IaaS sales volume, AWS, Microsoft, and Google Cloud are still in that order, but in terms of sales growth rate, Google Cloud, Microsoft, and AWS are in that order.

Google Cloud is growing rapidly in both sales and operating profit. Google Cloud continued to record losses until last year, but turned to profit for the first time in the third quarter of last year and is rapidly increasing its operating profit ratio.

AWS and Microsoft are showing somewhat slower growth rates. AWS is improving its operating profit through restructuring and adjusting its investment in service operations, while Microsoft’s operating profit is not increasing significantly due to increased investment in AI infrastructure.

All three companies emphasize that they were able to continue their growth by actively attracting demand for AI infrastructure. Until recently, the issue of countermeasures to corporate customers’ reduction in IT spending was rarely discussed.

“AWS’s AI business is a business with billions of dollars in sales and is growing at a triple-digit rate every year,” said Amazon CEO Andy Jessie. “It is growing three times faster than AWS itself in the early days.” revealed.

“Overall, our AI business is expected to exceed $10 billion in annual revenue in the next quarter, making it the fastest business to reach this milestone in history,” said Microsoft CEO Satya Nadella.

Microsoft said performance was driven by an increase in long-term commitments to its cloud platform, with commercial bookings rising 30%, exceeding expectations.

It is said that Azure’s Open AI service usage has more than doubled over the past six months as AI apps of major large customers such as LG, KT, and Hitachi have moved from testing to production. In addition, the number of Microsoft 365 Co-Pilot users has doubled compared to the previous quarter, and 70% of Fortune 500 companies are said to be using it. He emphasized that there is demand for additional purchases of various Co-Pilot series from existing customers.

Google Cloud is gaining strength by supporting external and group customers in generative AI demand-based sales. While the entire cloud industry is benefiting from the growing demand for generative AI, Google Cloud is seeing a noticeable increase in external customers through the Vertex platform. Because existing pure cloud sales are low, the demand effect for generative AI stands out dramatically. Additionally, Google’s various generative AI services are based on the Gemini model, and the infrastructure is supported by Google Cloud.

Sundar Pachai, CEO of Google, said, “Google Cloud has an overall growing opportunity as customers embrace generative AI,” adding, “Our technology leadership and AI portfolio will help us attract new customers, close large-scale transactions, and increase product adoption among existing customers.” “It helps us expand by another 30%,” he said.

He added, “Gemini API calls on the Vertex platform have increased approximately 14 times in six months.”

All three companies are expected to continue to increase investment in AI infrastructure, with the market paying attention to margins

AWS explained that during the last quarter, it recorded an operating profit of $3.5 billion, an increase of $3.5 billion compared to the same period last year, by focusing on cost management such as controlling hiring speed, improving infrastructure efficiency, and reducing costs. He added that starting this year, the operating profit ratio was increased by extending the effective life of the server by one more year. It is expected to spend approximately $75 billion in 2024, most of which will be used to support demand for AI services on AWS technology infrastructure. It is predicted that more infrastructure investment will be made next year.

Microsoft recorded cloud gross profit margin of 71%, down 2 points compared to the same period last year, and explained that despite improvements in Azure, the margin ratio decreased due to expansion of AI infrastructure. Microsoft predicted that the cloud margin ratio will remain at 70% in the future, but will decrease compared to the previous year due to expansion of AI infrastructure.

Google Cloud explained that its operating profit margin expanded due to strong sales performance and ongoing efficiency initiatives across its cloud AI products, core GCP, and workspace. Investment in technology infrastructure is expected to remain at $13 billion in the third quarter next quarter.

Anat Ashkenazi, Chief Financial Officer of Alphabet and Google, explained, “Google Cloud’s margin expansion is due to increased opportunities for margin expansion due to business expansion and improved efficiency across the business.”

Investors were interested in whether the margins of AI investments could be maintained at a high level and whether the capacity of the cloud infrastructure could keep up with the pace of increase in AI demand in the market.

Amazon CEO Andy Jessie responded to AI margins by saying, “Current margins are low, but they will improve in the long term as the market matures.” Regarding infrastructure capacity, he said, “Because we have a close partnership with NVIDIA, we were the first to provide NVIDIA H200, and we will release Trainium 2 within a few weeks to customers who want better price/performance for AI workloads.”

Compared to AWS, which only handles the demand for pure corporate generative AI workloads, Microsoft urgently needs to expand supply to meet increasing demand. This is because the world’s most popular generative AI services are all on Microsoft Azure infrastructure.

Microsoft CEO Satya Nadella said, “ChatGPT, Co-Pilot, GitHub Co-Pilot, etc. are all in the cloud, and all have limitations in the Microsoft ecosystem.” He added, “I think supply and demand will match in some areas as we move into the second half of this fiscal year.”

Microsoft CFO Amy Hood said, “We are confident that we will be able to better meet supply demand due to the active inflow of supply in the AI ​​sector in the second half of this year.”

Google Cloud’s position is that it will be easier to respond to infrastructure demand by investing in the TPU series in addition to NVIDIA GPUs. It is also emphasized that operational efficiency is steadily improving through investments in its own data centers, servers, and networking.

“We provide our customers with a variety of AI accelerator options, including a wide range of NVIDIA GPUs and our own custom TPUs,” said Google CEO Sundar Pichai. “We continue to drive efficiency and performance improvements through our 6th generation TPU, known as Trillium. “He said.

He also emphasized, “We have significantly lowered the machine cost per AI query, and over 18 months, we have reduced query costs by more than 90% and doubled the size of our custom Gemini model through hardware, engineering, and technical innovations.”

writing. Byline Network
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