While all four hyperscalers posted some excellent Q3 growth numbers, a comparison of RPO/backlog numbers for Q3 relative to Q2 reveals that Oracle (43%) and Google Cloud (46%) surged into hypergrowth while Microsoft (6.5%) and AWS (2.5%) showed only slight sequential growth.
As the AI Revolution accelerates and provides business customers with a wealth of choices for strategic AI partners, these RPO and backlog (aka pipeline) figures have become extremely valuable indicators of not only future demand but also fully committed business. And while they can be viewed from a range of perspectives — and I’ll provide a few of those key views in the table below — I wanted to focus today on the sequential Q3 versus Q2 RPO/backlog numbers for a few reasons:
- first, the wildly divergent numbers show once again that within the larger-than-life “hyperscaler” descriptor, these four foundational pillars of the AI Revolution are not by any means all the same in how they’re perceived by customers, how rapidly they innovate, and the range of services and capabilities they offer;
- second, while the quarterly revenues for Google Cloud and Oracle are much smaller than those for Microsoft and AWS, Google Cloud and Oracle have begun growing much more rapidly than their larger rivals in both quarterly revenue, which reflects the recent past, and RPO/backlog, which is a view into future growth; and
- third, I’m not cherry-picking some anomalous number or quarter — the sequential RPO/backlog numbers I’m highlighting today reflect the shifting fortunes of these four remarkable companies.
So, let’s take a look at these new RPO/backlog numbers, which I believe will reinforce my ongoing belief that AWS — in spite of its reaccelerating Q3 revenue — is the hyperscaler losing momentum to the others, and that Oracle and Google Cloud are in long-term ascendancy beyond AWS and approaching Microsoft.
| RPO/Backlog | Sequential Growth (Q3 over Q2) | Year-over-Year Growth | Quarterly Cloud Revenue | |
|---|---|---|---|---|
| Oracle | $455B | 43% | 359% | $7.2B |
| Google Cloud | $155B | 46% | 82% | $15.2B |
| Microsoft | $392B | 6.5% | 51% | $49.1B |
| AWS | $200B | 2.5% | ??? | $33.0B |
Okay, so let’s look at those from some different angles:
- Biggest RPO/backlog total: It’s Oracle by a mile. SHOCKER: So, Microsoft’s cloud revenue is 7X larger than Oracle’s, but when it comes to contracted future business, the momentum flips totally over to Oracle, whose RPO is 15% larger than Microsoft’s. Same with AWS: while its cloud revenue is about 6.5X larger than Oracle’s, the future looks drastically different with Oracle’s RPO being 2.3X bigger than AWS’s.
- Year-over-year RPO growth: While Oracle’s other-worldly figure of 359% was spiked by the disclosure of its $300-billion AI-inferencing deal with OpenAI, Oracle’s RPO numbers have been surging for the past six quarters even without the OpenAI blockbuster. SHOCKER: While AWS quarterly revenue is 2X bigger than Google Cloud’s, the future again paints a very different picture as the AWS backlog totals $200 billion while Google Cloud’s is $155 billion —up a whopping 82%! — representing a much smaller spread for future business. And that gap will shrink even more if Google Cloud can continue to outperform AWS so dramatically in the next few quarters. Do we have reason to believe that can happen? Well, let’s take a look at….
- Sequential RPO/backlog growth Q3 over Q2: A year ago, AWS did not provide backlog results so we can’t calculate a year-over-year backlog growth number, but we are able to measure its backlog growth from Q2’s $195 billion to Q3’s $200 billion, and that number is 2.5%. Compare that to Oracle’s sequential growth rates of 43% and Google Cloud’s 46%, and it is clear who has the customer-demand momentum going forward. And while Microsoft’s RPO figure of $392 billion is very impressive, and its 51% year-over-year RPO growth rate is also impressive, what about when that growth rate is matched up against Oracle’s 359% and Google Cloud’s 82%? Maybe Microsoft’s 51%, in context, is not so impressive, particularly when paired with its 6.5% sequential growth. As the football coach-turned-broadcaster loved to say, “You are what your record *says* you are.”
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Final Thoughts
We all know about lies, damned lies, and statistics. I suspect someone could take the numbers I’ve highlighted and finagle them in some way to show that it’s actually a good thing for Microsoft and AWS to have their smaller but nimbler and more-innovative competitors running rings around them, and that single-digit RPO/backlog growth is another good thing. And no doubt Microsoft and AWS had some big deals all set to close before September 30 but then the customer CFOs wanted more time and those deals got pushed into Q4 — and nothing like that ever happens with Oracle and Google Cloud.
No, folks, what we are seeing here is the unmistakable rise of Google Cloud and Oracle in the Cloud Wars — they’ve already surpassed AWS in everything but sheer backward-oriented mass and are now starting to make very serious inroads against Microsoft.
And if you don’t believe me, take another look at the numbers in the table above — because while you might think I’m lying, you are surely deluding yourself if you try to imply that those numbers are lying.
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