Google Cloud beaten: Microsoft scores in the cloud competition


Status: 10/27/2021 10:33 a.m.

The trend towards hybrid working is spurring the cloud business of US tech companies. Now Microsoft has put a strong exclamation mark in the competition of cloud providers with Amazon and Google.

By Angela Göpfert, tagesschau.de

The US technology group Microsoft has made a successful start to its new fiscal year. In the first quarter (July to September), revenues in the cloud division shot up by 50 percent. This means that the strong growth rate of the cloud business continues; Microsoft recorded an increase of 51 percent here in the previous quarter.

According to industry experts, Microsoft boss Satya Nadella has recently been able to convince users to switch to high-end versions of his cloud products and pay more accordingly.

What is the cloud

The term cloud means the interaction of several server computers. These servers take over data storage or complicated program processes. Users can access this via the Internet, mostly via programs on the accessing devices (“clients”) and the web browser.

Analysts excited about Microsoft’s cloud business

Microsoft CFO Amy Hood spoke of a “strong start” in the cloud business for the Microsoft fiscal year that began in July. She is not alone with this opinion, however. In their initial comments on Microsoft’s business figures, analysts emphasized the development of the cloud business in particular.

“This shows how Nadella can secure more and more market shares in this cloud arms race,” emphasized Dan Ives, stocks analyst at the US investment firm Wedbush, in an interview with Yahoo Finance. “That should drive the stock higher.”

Dan Morgan of the asset manager Synovus Trust shares the same opinion with Bloomberg, he also sees Microsoft Azure on the way to a higher market share.

Amazon Web Services with the license to store

So far, Amazon Web Services (AWS) has been the market leader among cloud providers. Only yesterday the “Financial Times” surprised with a report that British secret services are said to have commissioned AWS with the processing of confidential material. The aim is to use artificial intelligence more intensively for espionage.

However, there are no AWS figures for the past quarter yet, Amazon does not open its books until Thursday evening after the US market closes. Analysts expect an average of 15.5 billion dollars in sales for the Amazon cloud division.

Microsoft on the way to number one?

Can Microsoft, the previous number two in the cloud business, possibly replace AWS as the industry leader? The fact is: Microsoft reported revenues of $ 16.96 billion for its “Intelligent Cloud” segment for the past quarter.

A flattening of the growth dynamic is also not in sight: For the current quarter Microsoft is forecasting cloud revenues of 18.4 billion dollars – and is thus well above the analysts’ expectations of 17.9 billion dollars.

However, these numbers have to be limited insofar as Microsoft not only includes the Azure division in its “Intelligent Cloud” segment, but also other divisions such as GitHub, Visual Studio and Windows Server.

Google Cloud clearly below expectations

In any case, with its strong balance sheet, Microsoft has once again proven its will to fight in the competition of cloud providers – and once again relegated Google to its place.

Although the Google cloud unit was able to secure a little more market share under the aegis of Thomas Kurian, it is still miles behind Amazon Web Services (AWS) and Microsoft Azure. Nevertheless, Google boss Pichai believes that the division has a “lasting momentum”, as he underlined on the analyst call.

Google with record profit, YouTube disappointed

The third group in the cloud ranking showed revenues of just $ 4.99 billion for its Google Cloud division for the past quarter – and thus clearly missed the Wall Street consensus of $ 5.04 billion.

The revenues of the video portal YouTube also fell short of expectations with a plus of 44 percent to 7.2 billion dollars. Thanks to a strong advertising business, Alphabet still posted its third record profit in a row, at $ 18.9 billion.

Strong Xbox and Office 365 business

At Microsoft, meanwhile, in addition to the cloud, business relating to Xbox consoles and “Office 365” products have proven to be strong growth drivers with a plus of 30 and 21 percent respectively. The bottom line was that the group as a whole posted a profit of $ 20.5 billion.

But Microsoft is not only clearly ahead of Google when it comes to cloud business and profit. With a market capitalization of currently 2.33 trillion dollars, Microsoft is well ahead of Google parent Alphabet (1.86 trillion dollars) and can also move up further from Amazon (1.71 trillion dollars).

Amazon shares lag behind Microsoft and Google

If you only look at this year, however, the Alphabet share on the stock market has recently had the better run: it has soared by 59.6 percent since the beginning of the year, while Microsoft shares can boast a plus of 39.3 percent.

The Amazon share, on the other hand, with a price gain of 3.7 percent not only lagged behind the cloud competition, but also significantly behind the market as a whole. Investors and analysts alike will take a closer look at the numbers on Thursday evening in search of clues as to whether the growth share still has potential in the long term.


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