Cloud Q3 Roundup: Google Rips, Amazon Slips, Microsoft Blips

Amid a tumultuous global economic environment, Google Cloud sharply separated itself from the other two trillion-dollar cloud providers by boosting its Q3 growth rate over Q2’s while Microsoft and Amazon’s AWS both saw cloud revenue growth fall significantly relative to Q2.

Since there’s a lot going on here, I’m going to spell this out in specific steps.

1. Microsoft Cloud and AWS both posted very strong results in Q3: Microsoft cloud revenue was up 24% to $25.7 billion, and AWS’s was up 27% to $20.54 billion. Meanwhile, Google Cloud was up 38% to $6.89 billion.
   
2. While it’s not at all unusual for growth rates to decline over time as revenue bases get larger, the Q2-to-Q3 fall-offs for both Microsoft and AWS were uncharacteristically large. Let me spell those out for the past five quarters, starting with calendar Q3 of 2021 and ending with Q3 of 2022:
   • Microsoft: 36%, 32%, 32%, 28%, 24%
   • AWS: 39%, 40%, 37%, 33%, 27%
     
3. As I’ve said before, 99.9% of all CEOs on planet Earth would trade serious parts of their anatomies for growth rates of 24% or 27%, particularly on exceptionally large revenue bases: Microsoft Cloud will do about $100 billion this year, and AWS about $80 billion.
   
4. But that qualifier aside, and looking only at the real-world track records those companies have established, the five-quarter downward trend for those companies — particularly in Q3 — is impossible to overlook.
   
5. That’s why the performance of Google Cloud over that same five-quarter period and in the same macroeconomic environment stands out quite starkly — again with particular regard to Q3’s results. Here are Google Cloud’s growth rates for that five-quarter period, and again we’ll start with Q3 of 2021 and run through Q3 of 2022:
   • Google Cloud: 45%, 45%, 44%, 36%, 38%
     
6. As I always point out when comparing Google Cloud’s growth rate with that of Microsoft Cloud and AWS, I’m fully aware that it’s reasonable to expect Google Cloud to have higher rates of growth than the other two companies because Microsoft’s cloud business is about 4X larger than Google Cloud’s, and AWS’s is about 3X larger.
   
7. But disparities of size aside, riddle me this: at the same time that the cloud-revenue growth rate for Microsoft fell sequentially four percentage points (28% to 24%) and for AWS fell sequentially six percentage points (33% to 27%), how did Google Cloud manage to push its growth rate up by two percentage points (36% to 38%)?
   
8. Here’s another intriguing detail regarding the comparative Q3 results. As I wrote about late last week, Google Cloud grew its cloud revenue from Q2 to Q3 by the very same amount as Microsoft did: $600 million. With Microsoft’s cloud business being 4X larger than Google Cloud, it’s reasonable to expect that Microsoft would add much more sequential cloud revenue than Google Cloud — but, both grew from Q2 to Q3 by $600 million. What are we to make of that — tough quarter from Microsoft? Fabulous quarter by Google Cloud? Both?
   
9. Let’s go back to the fact that Google Cloud’s growth rate rose sequentially while those of Microsoft Cloud and AWS fell. As far as I can imagine, all three companies go after the same broad set of customers and prospects, so it’s not like Google Cloud is isolated in some market segment that magically dodged the global uncertainty. And while each of the three companies has unique cloud portfolios, it’s also true that there’s a great deal of overlap, particularly in infrastructure — so what did Google Cloud do to push its growth rate up while those of its two most-direct competitors went down?
   
10. In the midst of the greatest growth market the world has ever known, it can be easy to overlook how rapidly and radically the companies in the Cloud Wars Top 10 are changing and differentiating themselves, and that’s why I’ve put together this analysis. And it’s equally true that here in the very early stages of the Cloud Wars, quarter-to-quarter perturbations can be less important than long-term trends. So, three months from now, it’s possible that the trends outlined here will be quite different and perhaps even reversed.

But as someone once said, yesterday is history and tomorrow is a mystery — and at least for the here and now, Google Cloud is definitely the hot hand among the trillion-dollar cloud heavyweights.

PS — here are a few chunks of numbers that offer some perspective on those heavyweights.

Last five quarters of AWS

• 2022 Q3 — $20.54 billion, 27%
• 2022 Q2 — $19.74 billion, 33%          
• 2022 Q1 — $18.44 billion, 37%
• 2021 Q4 — $17.78 billion, 40%
• 2021 Q3 — $16.11 billion, 39%

Last five quarters of Microsoft Cloud

• 2022 Q3 — $25.7 billion, 24%
• 2022 Q2 — $25.1 billion, 28%
• 2022 Q1 — $23.4 billion, 32%
• 2021 Q4 — $22.1 billion, 32%
• 2021 Q3 — $20.7 billion, 36%

Last five quarters of Google Cloud

• 2022 Q3 — $6.89 billion, 38%
• 2022 Q2 — $6.28 billion, 36%
• 2022 Q1 — $5.82 billion, 44%
• 2021 Q4 — $5.54 billion, 45%
• 2021 Q3 — $4.99 billion, 45%

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