Alphabet CEO Sundar Pichai speaks at the Munich Security Conference at the Bavaria Hof Hotel on February 16, 2024 in Munich, Germany.
Tobias Haas | Image Alliance | Getty Images
With Wall Street’s laser focus on cloud computing this week, Google Outpacing rivals in growth is a big sign to investors that the internet company is gaining traction in the artificial intelligence space.
Google’s Cloud business (including infrastructure and software subscriptions) grew 35% annually in the third quarter to $11.35 billion, accelerating from 29% in the previous quarter.
Amazon Web Services remains the market leader, growing 19% to $27.45 billion, meaning it is more than twice the size of Google Cloud but is expanding at about half the rate. Second place Microsoft said revenue comes from Azure and other cloud services 33% increase Started a year ago.
Five of six trillion-dollar technology companies report results this week, including artificial intelligence chip maker NVIDIA as an outlier. Amazon, Alphabet and Microsoft always release reports around the same time to let investors know how the cloud wars are progressing.
Analysts at Argus Research recommend buying the stock, writing in a note: “While Alphabet is often criticized as a dead letter due to its reliance on digital advertising, Google Cloud’s rapid growth has begun to diversify the company’s revenue.
Cloud computing has long been a source of funding for Google, but that’s no longer the case.
Cloud operating margin at 17% in third quarter after Google’s first profit last year. Melissa Otto, head of research for Visible Alpha’s technology, media and telecommunications sector, told CNBC this week that it “really exceeded expectations.” She said she wasn’t sure the company could maintain that level of profitability.
The opposite is true for Amazon, which has long relied on AWS for the majority of its profits.
AWS’ operating margin in the third quarter was 38%, which Bernstein analysts called an “amazing” number. Senior executives have been very cautious in recruiting and have stopped hiring Not very popular AWS services. Additionally, in early 2024, Amazon extended the life of its servers from five to six years, a change that improved operating margins by 200 basis points, or 2 percentage points.
Microsoft This week it began to provide investors with a more accurate interpretation of its Azure public cloud. When the company has reported Azure revenue growth in the past, the number has included sales of mobile and security services as well as Power BI data analysis software. Microsoft is a major investor in ChatGPT creator OpenAI, which is getting a huge boost from artificial intelligence services.
“Demand continues to be higher than our available capacity,” Microsoft Chief Financial Officer Amy Hood said on the company’s earnings call.
Hood said that while Azure’s growth will slow this quarter, it should pick up in the first half of 2025 “as our capital investments increase available AI capacity to meet more growing demand.” “
Amazon is seeing a similar dynamic.
“I think almost everyone’s capacity right now is less than what they need, and the area where the company could use more supply is really primarily in chips,” Amazon Chief Executive Andy Jassy said on the company’s earnings call.
To lighten the load, Amazon is relying partly on its own processors in addition to Nvidia’s graphics processing units (GPUs). Jassy says customers are showing interest in company’s Trainium 2 second generation chips used to train the model.
“We reached out to our manufacturing partners multiple times and produced a lot more product than we originally planned,” he said.
Google is currently developing a sixth-generation customized tensor processing unit for artificial intelligence. CEO Sundar Pichai He told analysts that he has been spending time with the TPU team.
“I’m very excited about the forward-looking roadmap, but it all allows us to plan ahead for the future and really drive optimized architecture for it,” he said.
Microsoft launches its own AI chip in the cloud, mayaa year ago. A spokesman said the company has begun using Maia chips to power its own services but has not yet made them available for leasing to customers.
Analysts at DA Davidson said in a report this week that they don’t think Microsoft can win against Amazon and Google. They rate Microsoft neutral.
OracleIt is generally ranked fourth among U.S. cloud infrastructure companies and is expected to report quarterly results in December. In its last report, Oracle Represents cloud infrastructure revenue up 45% to US$2.2 billion, an increase of 42% from the previous quarter.
Oracle recently partnered with three of its major cloud rivals to make its database available on their services, a move Oracle’s chairman Larry Ellison “It will drive the growth of our database business in the coming years,” he said on the last earnings call.
