Microsoft Wins the Cloud Battle, Again 

During the previous quarter, we had predicted that AWS might take over Microsoft’s Azure in terms of revenue growth. However, going by the latest quarterly results, it is observed that Microsoft Azure is performing strongly in the market and it is giving tough competition to both Google Cloud and AWS. 

Azure’s revenue experienced a robust 29% surge in the quarter, outpacing the 26% consensus among analysts polled by CNBC and StreetAccount. It’s important to note that Microsoft does not disclose Azure revenue in dollars. 

However, during the earnings call Microsoft chief Satya Nadella said that “We are off to a strong start to the fiscal year driven by the continued strength of Microsoft Cloud, which surpassed $31.8 billion in quarterly revenue, up 24%.” 

In comparison, AWS recorded a 12% growth, reaching $21.3 billion, up from $20.53 billion in the corresponding quarter last year. Meanwhile, Google reported a substantial 22% revenue growth, totaling $8.41 billion. 

Amazon is really trying hard to maintain its position in the cloud market. According to estimates from Synergy Research Group, Amazon’s market share in the worldwide cloud infrastructure market stood at 32 percent in the third quarter of 2023, followed by Azure at 23%. Microsoft has seen a 1% rise in market share compared to FY23 Q2. Amazon and Google, on the other hand, seem to be losing market share. 

Microsoft Azure’s “OOM” Strategy 

If we look at all the three hyperscalers, they are trying their best to provide both cloud as well as generative AI solutions, however that might not be enough for them. Currently, most enterprise customers are transitioning towards a multi-cloud strategy, and the one player that is enabling this ecosystem is Oracle (O), and only Microsoft seems to be benefiting from that. 

During the recent earnings call Microsoft chief Satya Nadella said 

“We are meeting customers where they are, helping them run apps across on-prem, edge, and multi cloud environments. We now have 21,000 Arc customers, up 140% year over year. We are the only other cloud provider to run Oracle’s database services, making it simpler for customers to migrate their on-prem Oracle databases to our cloud.” 

He further added that customers like PepsiCo and Vodafone will have access to a seamless, fully integrated experience for deploying, managing, and using Oracle database instances on Azure. 

To match Azure’s success, both AWS and Google might need to embrace a multi-cloud strategy eventually. It’s only a matter of time before AWS and Google Cloud joins Oracle, making them the NVIDIA of Cloud. 

“It’s not a matter of if; it’s a matter of when it’s going to happen,” said SVP of Oracle Cloud Infrastructure, Karan Batta, in an exclusive interaction with AIM. 

Beyond its collaboration with Oracle, Microsoft’s partnership with OpenAI (O) continues to work well for them. According to Nadella, Azure OpenAI serves over 18,000 customers, a number that includes new Azure clients as well. 

Not to forget its open-source efforts, and its recent partnership with Meta (M), where the company is offering Meta’s Llama 2 to its cloud customers. 

Around 3 percentage points of the quarter’s Azure growth was tied to AI, chief financial officer Amy Hood said. Three months ago, the company had forecast 2 points of Azure growth in that area. This number is only going to grow in the coming months, giving wider options for its customers. 

Meanwhile AWS is optimistic about its partnership with Anthropic. It recently announced that it will invest about $4 billion in Anthropic.  Anthropic chose AWS as its primary cloud provider and will use Trainium and Inferentia to build, train and deploy its future LLMs. As part of this partnership, AWS and Anthropic will collaborate on the future development of Trainium and Inferentia technology.

AWS joined the party late, and now hosts Meta’s Llama 2 in Bedrock, along with models from AI21 Labs, Anthropic, Cohere, and Stability AI. AWS claims itself to be the pioneer in offering Llama 2 (13-billion- and 70-billion-parameter versions) as a fully managed generative AI service. 

Amazon chief Andy Jassy at the earnings call said that “Bedrock has added several new compelling features, including the ability to create agents which can be programmed to accomplish tasks like answering questions or automating workflows.” This will further boost AWS’s as now the conversation has moved on Autonomous AI agents. 

Same goes for Google as well. It recently added Meta’s Llama 2 and TII’s Falcon, in addition to BERT, T-5 FLAN, ViT, and EfficientNet. Unfortunately, it appears that Google was too late to realise that hosting just PaLM was not enough for the enterprises. 

The cloud competition is heating up, and generative AI, alongside multi-cloud strategy is only elevating the stakes for hyperscalers. It is only going to intensify here onwards.