Q4 Cloud Showdown: Will Google Top Microsoft in Revenue Growth?
While Microsoft Cloud’s revenue is almost 4X larger than that of Google Cloud, I’ll be watching Q4 results to see if Google Cloud once again matches or even exceeds its much bigger rival in cloud-revenue growth.
Three months ago, in a piece headlined Cloud Shocker: #3 Google Matches #1 Microsoft in Cloud Revenue Growth, I described how Google Cloud, in spite of the striking disparity in overall reven between it and Microsoft, added as much new cloud revenue in Q3 as its much-larger rival. That is a very clear indication that customers making decisions in Q3 about cloud investments have become just as likely to pick Google Cloud as Microsoft Cloud.
Was Google Cloud able to sustain that Q3 momentum into Q4? We’ll find that over the next few weeks as both companies release financial results for the quarter and the full year.
The significance of that achievement by Google Cloud is clear: it means that it is now able—or at least was able in Q3—to match Microsoft dollar for dollar in winning new cloud customers.
Here are the details in this battle for the hearts, minds, and wallets of customers in 2023:
- For the period ended Sept. 30, Microsoft Cloud revenue rose by $600 million—from $25.1 billion to $25.7 billion.
- For the same period, Google Cloud’s revenue jumped by $599 million—from $6.28 billion to $6.87 billion.
- And for all you punctilious bookkeepers out there: while I’m not one to turn up my nose at $1 million, for purposes of this comparison I think we should agree that Google Cloud’s $599 million increase in new revenue is an equivalent match for Microsoft Cloud’s $600 million.
To give you additional context, here’s an excerpt from my Oct. 27 analysis referenced above:
Let’s also look at the growth rates for each cloud business for the just-reported quarter: for Google, it was 37.5%, and for Microsoft, it was 24% (31% in constant currency). That means Google Cloud grew more than 50% faster than the Microsoft Cloud business in Q3.
Now, 4X larger or not, that is a whopping discrepancy and speaks to which company has the momentum in the market right now. It also follows closely on my own observation, made two weeks ago on October 13, about a parallel but nonfinancial comparison of the two companies: Google Cloud Overtakes Microsoft as Innovation Leader in the Cloud.
Microsoft will disclose its fiscal-Q2 results on Jan. 24, while Google Cloud parent Alphabet will release its Q4 numbers on Feb. 2.
In a stunning Cloud Wars Top 10 development, Google Cloud added as much new cloud revenue in Q3 as did market leader Microsoft — $600 million — in a clear sign that Google Cloud is building enormous momentum around the new types of business outcomes customers expect from their cloud investments.
While Microsoft’s overall cloud business is about 4X larger than Google Cloud’s, the fact that Google Cloud gained as much new cloud revenue in Q3 compared to Q2 is a stunning achievement because achieving new-revenue parity with mighty Microsoft would have seemed unimaginable only a few quarters ago.
Here are the basics:
- Google Cloud: In Q2, Google Cloud’s revenue was $6.276 billion. In Q3, it was $6.868 billion, yielding a total of $592 million in additional new revenue in Q3 over Q2.
- Microsoft Cloud: For the quarter ended June 30 (Microsoft’s fiscal Q4), cloud revenue was $25.1 billion, and for the quarter ended September 30 it was $25.7 billion (slide 5). That’s a difference of — wait for it! — $600 million.
And I’m willing to round up Google Cloud’s $592 million to a cool $600 million to make the rather shocking point that while, as noted, Microsoft’s cloud business is 4X larger than Google Cloud’s, in the here and now, Google Cloud has matched mighty Microsoft dollar for dollar in incremental revenue.
Let’s also look at the growth rates for each cloud business for the just-reported quarter: for Google, it was 37.5%, and for Microsoft, it was 24% (31% in constant currency). That means Google Cloud grew more than 50% faster than the Microsoft Cloud business in Q3.
Now, 4X larger or not, that is a whopping discrepancy and speaks to which company has the momentum in the market right now. It also follows closely on my own observation, made two weeks ago on October 13, about a parallel but nonfinancial comparison of the two companies: Google Cloud Overtakes Microsoft as Innovation Leader in the Cloud.
Is that opinion worth the paper it’s written on? Maybe, maybe not — I did not come to that conclusion lightly and weighed a great deal of evidence before making that case. But yes, it is an indisputably subjective comparison.
But there is absolutely nothing subjective about these two facts: Google Cloud is not only growing much, much faster than Microsoft Cloud — 37.5% to 24% — but also fully matched Microsoft in the amount of incremental cloud revenue generated in the quarter ended September 30.
As momentous as that is, Microsoft is still by far the #1 player in the Cloud Wars Top 10. But seismic perturbations like this can sometimes lead to momentous disruptions — eruptions? — down the road.
So, well done, Google Cloud!
