Microsoft's Azure cloud business just showed accelerated growth for the first time in years as it takes on Amazon Web Services
Microsoft's Azure cloud computing business grew faster this quarter than last quarter. It's the first time Azure's quarterly revenue growth rate has increased in years. The increase was a very modest three percentage points, but any increase is significant as industry watchers looks for indications Microsoft is gaining traction in the cloud market over dominant Amazon Web Services. However, Microsoft still does not break out specific revenue figures for Azure. Click here to read more BI Prime stories.
For the first time in years, Microsoft's cloud computing business grew faster during the company's most recent quarter than in the quarter before. The company released fiscal second-quarter earnings on Wednesday, reported a 62 percent increase in Azure revenue growth compared to the same quarter last year. The growth rate is up from Azure's 59 percent growth rate last quarter. While a three-percentage-point increase is very modest, it's the first increase in Azure's growth rate in many quarters and significant as the cloud computing industry watches for signs of Microsoft's growing traction. Azure revenue has been falling consistently since after October 2017 earnings release when the company reported a 98% Azure growth rate (subsequent growth rates were 93%, 76%, 76%, 73% and finally 59% last quarter before jumping to 62% this quarter). Even as growth slowed, Wall Street seemed unfazed. Analysts told Business Insider they chalk it up to the "law of large numbers." Basically, the bigger these platforms get, the harder it is to post the triple-digit growth figures that they did when the platforms were younger. Amazon Web Services has seen its revenue growth slow too, for largely the same reasons. Microsoft's cloud business is closely watched, particularly after the company scored a $10 billion Pentagon cloud computing contract over AWS. The contract didn't begin within the quarter, but the most bullish analysts on Microsoft expected it to lead to business elsewhere and even said Microsoft could erode AWS market share as a result. AWS disagrees, to say the least. The company is challenging the Pentagon's contract decision based on the premise AWS technology is so superior to Microsoft that the decision much has included political interference. Microsoft has repeatedly said it believes it won on its own merits. Microsoft handily beat Wall Street expectations when the company released fiscal second-quarter earnings on Wednesday, reporting a $11.6 billion profit on earnings of $36.9 billion revenue. Got a tip? Contact this reporter via email at email@example.com, message her on Twitter @ashannstew, or send her a secure message through Signal at 425-344-8242.Join the conversation about this story » NOW WATCH: Behind the scenes with Shepard Smith — the Fox News star who just announced his resignation from the network
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Microsoft said supply chain constraints caused by the coronavirus crisis delayed its spending on expanding cloud...Microsoft said supply chain constraints caused by the coronavirus crisis delayed its spending on expanding cloud infrastructure. Those delays, plus an unprecendented surge in demand for its services, caused the company to struggle to keep up with demand, Jonathan Neilson, Microsoft's finance director of investor relations, told Business Insider. The pandemic has been a big test for Microsoft's cloud business as it tries to upend the market-leading Amazon Web Services, which has said it has experienced no outages during the crisis. Visit Business Insider's home page for more stories. Microsoft blamed supply chain constraints related to the coronavirus crisis for its Azure cloud's capacity issues, saying those constraints delayed the company from expanding its cloud infrastructure. Microsoft admitted in a note to customers published last week that its Azure cloud business has struggled to keep up as the demand for its services including its Teams communications app "crossed into unprecedented territory." In an earnings slide released with Microsoft third-quarter report, the company said it "delayed cloud infrastructure spend due to supply chain constraints." Jonathan Neilson, Microsoft's finance director of investor relations, told Business Insider that the confluence of supply chain constraints and the surge in demand contributed to Microsoft's cloud capacity issues. The pandemic has been a big test for Microsoft's cloud business as it tries to upend the market-leading Amazon Web Services, which has said it has experienced no outages during the crisis. Microsoft released the information when it reported third-quarter earnings on Wednesday, beating analyst expectations as it reported $35 billion in revenue and $10.8 billion in net income. Overall, Microsoft said the coronavirus crisis had "minimal net impact" on company revenue. Cloud usage increased, especially for the Microsoft 365 bundle of cloud applications including Teams, Azure, Windows Virtual Desktop, advanced security solutions, and Power Platform. Meanwhile, Microsoft said there was a slowdown in transactional licensing — which Neilson said are on-time license purchases versus those purchased on a monthly basis via subscriptions to services like Office 365 – and a reduction in LinkedIn advertising spend during the quarter. Are you a Microsoft employee or customer? Contact this reporter via email at firstname.lastname@example.org, message her on Twitter @ashannstew, or send her a secure message through Signal at 425-344-8242.Join the conversation about this story » NOW WATCH: Why thoroughbred horse semen is the world's most expensive liquid
Google Cloud could lose its third-place spot in the cloud wars to Chinese giant Alibaba, a new report says
A new Forrester report predicts that in 2020, Alibaba will surpass Google Cloud in revenue and...A new Forrester report predicts that in 2020, Alibaba will surpass Google Cloud in revenue and become the third place cloud globally, behind Amazon Web Services and Microsoft. This is because Alibaba has a growing presence in China, which has an increased demand for cloud computing services. Still, Google Cloud has a shot at getting its third place spot back if it continues to build out its enterprise salesforce and support team and expand business in Europe, the report says. Click here for more BI Prime stories. Google Cloud will need to watch its back because next year, Alibaba will likely steal its third place spot in the cloud wars against Amazon and Microsoft, according to a new Forrester report. The report predicts that next year, Alibaba will generate $4.5 billion in revenue from its cloud and overtake Google Cloud — currently the third-place entrant in a race that is currently led by Amazon Web Services, with Microsoft in second place. Alibaba, sometimes called the "Amazon of China," is a massive online retailer that posted revenues of the equivalent of over $56 billion in its most recent fiscal year. And, like Amazon, Alibaba expanded in 2009 into cloud computing with the formation of its Alibaba Cloud unit. In July, Google reported an $8 billion annual revenue run rate for its cloud business, which includes its cloud infrastructure services as well as the G Suite productivity suite. However, Google does not break out specific revenue figures for either business. All of that said, Forrester estimates that the revenue from Alibaba's cloud infrastructure business will soon surpass that of Google's. "When we say that Alibaba is threatening Google for the third post, we believe in 2020 Alibaba will make more money than Google will," Dave Bartoletti, vice president and principal analyst at Forrester, told Business Insider. That's because Alibaba has strong uptake in China, where it's headquartered, Bartoletti says. Alibaba isn't necessarily known as an innovator in the space, Bartoletti says, but it's adept at duplicating services available on other clouds. "They are the leading public cloud provider in China, which is a very big market," Bartoletti said. "They have a lot of people using their services there. They are doing well financially. They have money to invest in build out. They are doing a good job of being a fast follower." Still, Bartoletti says, Google Cloud won't have to worry too much about competition from Alibaba when it comes to domestic customers. Alibaba has a smaller presence in North America, so Google Cloud will likely keep its third-place spot in that region, he said. A Google Cloud spokesperson declined to comment further on the report, beyond pointing out its revenue run rate. Business Insider has reached out to Alibaba for comment. 'Alibaba is going to be a little faster right now' While Alibaba continues its strong growth in China, Google Cloud is in a transition phase as it establishes its strategy to snag enterprise customers, Bartoletti says. Microsoft has decades-long relationships with these types of customers, while AWS has been in the cloud market long enough to make big progress on building those bridges, too. "Google was later to the public cloud market for AWS and Azure," Bartoletti said. "They're moving quickly but Alibaba is going to be a little faster right now." However, Bartoletti notes that CEO Thomas Kurian, who joined Google Cloud after years at Oracle, has invested in building out an enterprise salesforce. Previously, Business Insider reported that Google Cloud created a new program to assign highly-paid senior salespeople to go after large customers and changed how it compensated its salespeople to a model more similar to that of Oracle. "[Google Cloud has] made incredible strides in the last couple of years, but they still have a lot of headwinds in supporting enterprises," Bartoletti said. "It's not in their core DNA." A 'decent position to be in' Bartoletti says that if Alibaba does surpass Google Cloud, it will only be by a little bit, leaving the door open for a Google comeback. If nothing else, the search giant has strong name recognition in North America, where Alibaba's brand is weaker. Furthermore, Bartoletti says none of these four cloud giants have established their dominance Europe yet, which is another chance for a Google Cloud to get ahead. "There are no hyperscale public cloud providers based in Europe," Bartoletti said. "Europeans are very sensitive to data protection and data residency. They're kind of wary of American and Chinese companies having access to their data." To regain its place, Google Cloud needs to get used to doing business in the way to which large enterprises are accustomed, such as by investing in its partners the way Microsoft and AWS do, as well as building out its salesforce and improving its support processes, Bartoletti says. He also says Google needs to continue building out the services it specializes in, such as products for Kubernetes, a widely popular open source cloud project that was started in-house at the company – but that has gone on to become something of a standard in the industry. Another opportunity, he said, would be for Google Cloud to redouble its appeal in so-called multicloud, an industry trend where customers use multiple clouds from multiple providers, either for the sake of redundancy, or for otherwise taking advantage of certain platform-specific features and pricing plans. "Another way that Google could ramp up revenue again is to be really be seen as a viable alternative to AWS and Azure," Bartoletti said. "For companies that for whatever reason believe they need to be in more than one cloud, Google as a second cloud to add to AWS and Azure is a decent position to be in."SEE ALSO: Google Cloud's study of 31,000 tech pros shows how working smarter and addressing burnout makes for better cybersecurity and higher productivity Join the conversation about this story » NOW WATCH: Most maps of Louisiana aren't entirely right. Here's what the state really looks like.
Amazon Web Services says it's making a big hiring push for sales and marketing as its growth continues to slow
Amazon is investing more in marketing and salespeople "to handle a wider group of customers," Chief...Amazon is investing more in marketing and salespeople "to handle a wider group of customers," Chief Financial Officer Brian Olsavsky said in its quarterly earnings call on Thursday. Amazon Web Services started out primarily selling to startups, while Microsoft knows the enterprise business well. Hiring enterprise sales and marketing people can help AWS maintain its dominance of the enterprise market. Amazon added nearly 100,000 employees in the third quarter alone, bringing the Seattle-based company's workforce to 750,000 total. Most of the new hires are in fulfillment and transportation as Amazon expands one-day shipping ahead of the holiday season. Amazon reported less-than-expected profit in third-quarter earnings on Thursday — $4.23 per share on revenue of $70 billion. AWS raked in $9 billion in revenue for the quarter, and was responsible for nearly 72 percent of Amazon's total operating income over the period. Tech industry analyst Patrick Moorhead said Amazon's $2.3 billion in cloud sales growth for the quarter is "larger than the size of most cloud company's revenue" and chalked its revenue growth decline up to the "law of large numbers." Click here to read more BI Prime stories Amazon Web Services is hiring more sales and marketing people, as the dominant cloud computing business fends off challengers including Microsoft, the Seattle-based company disclosed Thursday. Amazon overall added nearly 100,000 employees in the third quarter alone, growing its workforce to 750,000 people. Brian Olsavsky, Amazon's chief financial officer, said during a call to investors after Amazon reported third-quarter earnings, said that the biggest driver of the hiring was adding people for fulfillment and transportation roles as Amazon tries to expand one-day shipping. Amazon expects the move will cost $1.5 billion in the next quarter. However, Olsavsky separately identified AWS sales and marketing as a major hiring priority for the company in the year to come. "We are investing a lot more this year in salesforce and marketing personnel mainly to handle a wider group of customers, an increasingly wide group of products – we continue to add thousands of products and features a year – and we continue to expand geographically," Olsavsky said of AWS. Amazon Web Services started off primarily selling to startups. Microsoft, meanwhile, has a long history of selling to large enterprise companies. Investing in enterprise sales and marketing people, as Olsavsky said Amazon is doing, could help the company maintain its dominance over Microsoft and others. Amazon's new sales and marketing hires are "especially for the enterprise market," Olsavsky said. Amazon Web Services declined to disclose how many of Amazon's 750,000 employees work in AWS. For a ballpark figure, more than 45,000 LinkedIn users list AWS as their current employer, though those profiles aren't always accurate. Amazon on Thursday reported earnings of $4.23 per share on revenue of $70 billion. Profit was less than Wall Street expected, sending Amazon stock down as much as 8.62% in after-hours immediately following the release. Amazon stock closed up 1% to about $1,780 per share in regular trading Thursday. AWS is a big driver of profit for Amazon. AWS revenue reached $9 billion in the third quarter. AWS was responsible for nearly 72% of Amazon's nearly $3.2 billion in operating income in the third quarter. But AWS' revenue growth continued to slow in the third quarter, dropping to 35% from 37% last quarter, continuing a pattern of slowing revenue growth. Analyst Patrick Moorhead of Moor Insights and Strategy said that the percentage points don't tell the whole story for AWS, however. Last year, AWS pulled in $6.7 billion in revenue in the third quarter — meaning that it grew by $2.3 billion in 12 short months. That $2.3 billion figure is "larger than the size of most cloud company's revenue," analyst Patrick Moorhead of Moor Insights and Strategy said. He chalked the revenue growth decline up to the "law of large numbers," meaning that it's simply harder to maintain impressive growth figures when the base is already so impressive. Amazon isn't alone in facing that particular problem, it should be noted. When Microsoft announced its own quarterly earnings release earlier this week, the company said that revenue growth of its Microsoft Azure cloud platform slowed too, down to 59 percent from 64 percent last year. Experts seemed mostly similarly unfazed by that drop and said Microsoft's Azure cloud business has an opportunity to close the gap with Amazon Web Services as more customers seek a hybrid cloud, which is basically a mix of on-premises and public-cloud resources.Join the conversation about this story » NOW WATCH: Jeff Bezos is worth over $160 billion — here's how the world's richest man makes and spends his money