If you’re wondering why Microsoft CEO Satya Nadella launched an all-out cloud market share blitz last week, the reason is clear: For Q2, AWS and Google Cloud once again , it has grown much faster than Microsoft in the cloud and is shrinking its once overwhelming lead.
Just to be clear: I’m not just talking about the cloud infrastructure sub-segment that is so often the focus of various media reports and some analysts. My coverage at Cloud Wars has always been across all of the major vendors’ cloud portfolios, encompassing not just infrastructure, but also applications, databases, and other software services.
Here are the Q2 growth rates and revenue totals for these three companies:
- Microsoft up 28% to $25 billion;
- AWS up 33% to $19.7 billion; and
- Google Cloud up 36% to $6.3 billion.
Obviously, Microsoft is by far the biggest cloud provider. As these staggering quarterly revenue figures become more and more important, it is increasingly difficult for Microsoft to maintain the growth rate of 30% or more.
But beyond these Q2 numbers taken in isolation, what we have here is a continuing trend: AWS has grown faster than Microsoft’s cloud business for 5 consecutive quarters. Yes, the market is huge and growing, I believe, to get bigger over the next few years, but as it happens, AWS is growing at a faster rate than the Microsoft Cloud business.
This is something I’ve pointed out before because what we’re talking about here is, after all, “the biggest growth market the world has ever seen.” In this context, among all the voracious growth monsters, it is enlightening who is gobbling up opportunities faster than their competitors.
And if you look at the numbers for the last 5 quarters, the very clear answer is that AWS is chewing up Microsoft’s unassailable lead in the cloud simply by virtue of growing faster. Here’s the cloud revenue growth rate for the last 5 quarters – and for clarity, I’m listing them by calendar quarters, even though Microsoft’s fiscal year starts July 1 and ends June 30.
- Q2 2022: Microsoft cloud +28%, AWS +33%
- Q1 2022: Microsoft Cloud +32%, AWS +37%
- Q4 2021: Microsoft cloud +32%, AWS +40%
- Q3 2021: Microsoft Cloud +36%, AWS +39%
- Q2 2021: Microsoft Cloud +36%, AWS +37%
Although only a quarter of the size of Microsoft Cloud, Google Cloud continues to grow much faster because, like Microsoft, it not only caters to cloud infrastructure, but also applications and related applications. industry-specific solutions that businesses today desperately need to keep pace with rapidly changing customer requirements.
Against this backdrop, we can more clearly understand the rationale for Nadella’s statement at the top of Microsoft’s July 26 earnings call that “we will invest to take shares and build new businesses and categories.” This is a clear indication that Nadella is committed to reversing the trend revealed in the quarterly comparative figures above.
As I described in an article last week titled Microsoft is starting a market share war and customers are sure to win, Nadell and CFO Amy Hood have hammered this “take share” theme throughout the results call citing this ambition more than a dozen times. From that article, here’s how they repeatedly and aggressively made this point:
- “We will invest to take shares and create new businesses and categories where we have a long-term structured advantage. »
- “Teams are in all collaboration categories to chat with meetings, call and see higher intensity of use.
- “Despite the evolution of the PC market during the quarter, we continue to see more PCs shipped than before the pandemic and we are gaining market share. »
- When it comes to cybersecurity, “we take shares in all the major categories we serve. »
- “We are focused on growing our share and engagement on Edge, Bing and our custom content feed, Microsoft Start. »
- “And Edge continues to gain market share as consumers use it to save money with our built-in coupon and price comparison features. »
- “In our consumer sector, despite these macro challenges, we led another quarter of stock gains for Windows in the PC market and for Edge in browsers.
- “And as you said satya, we’ve seen market share gains in areas like data and AI, dynamics, teams, and security. »
- “We continue to expect double-digit growth in revenue and operating profit, both in constant currencies and in US dollars. Top line growth will be driven by continued momentum in our business operations and focus on equity gains across our portfolio. »
- “Our differentiated market position, customer demand across our solution portfolio, and consistent execution in the Microsoft cloud created another strong quarter of revenue and share growth, although we expected to continue to see sustained growth in our small and medium business segment. »
- “And in Dynamics, we expect mid-to-high-level teen revenue growth, driven by share growth in Dynamics 365.”
- “As we determine, we continue to see strong demand for our products and services and built-up commitment to our platform as we remain focused on creating reclaimed customer value in this dynamic environment, translating into revenue gains.” ‘the action continues. »
- Response to a question about Azure growth: “I feel good about proposing workloads that Satya specified and where we could take part. »
Now, you could look at this and so on, “Big deal – who cares?” And you might be right.
But I’ve followed these companies very closely for many years, and I don’t recall Nadella ever using this kind of sharp “ownership” messaging. When you provide the parallel reality that it’s AWS and Google Cloud that have taken sides over the last few quarters, it becomes clear that the biggest and most influential cloud provider in the world – that would be Microsoft – is on the point of doing everything possible to change the way the game is played.
And that means Cloud Wars is about to heat up even more.
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