We closely watch cloud revenues of Amazon, Microsoft, and Google to gauge the direction of the software market. The cloud divisions of these companies are Amazon’s AWS, Microsoft’s Intelligent Cloud, and Google Cloud Products. All three have now reported their Q1 growth, summarized below.
MSFT’s Intelligent Cloud had $26.7Bln in revenue, up 21% year over year. During the company’s conference call, Chief Financial Officer Amy Hood said “demand signals” across the company’s businesses have remained consistent so far this month. That at least indicates that the major corporations that drive the bulk of Microsoft’s revenue aren’t slashing their technology budgets just yet. Chief Executive Satya Nadella called software “the most valuable resource we have to fight any type of inflationary pressure or any type of growth pressure, where you need to do more with less.”
In Q4, Microsoft cited supply constraints in its earnings to explain why its cloud business didn’t grow faster. Nadella praised DeepSeek’s innovations and said the techniques it used will “all get commoditized” and be broadly used in the industry, which will benefit Microsoft’s cloud computing and PC businesses. “AI will be much more ubiquitous,” he said. “This is all good news as far as I’m concerned.”
Google’s Cloud grew 28% YOY to $12.3bln. In the conference call, Google’s Chief Business Officer Philipp Schindler said it is “too early to comment” on trends for the current quarter.
In Q4, Google Chief Executive Sundar Pichai said Google was accelerating its investments in the data centers that power AI, both for his company and clients of its cloud-computing business. Pichai said Google would spend about $75 billion on capital expenditures this year, compared with $52.5 billion in 2024. Alphabet Chief Financial Officer Anat Ashkenazi said the cloud business exited the year with more customer demand than available capacity, and it was working to build more.
Amazon’s revenue from AWS was $29.3bln in the quarter, up 17% year over year. AWS growth was marginally light, but the forward commentary remains positive (capacity being consumed the moment it becomes available), and backlog growth accelerated by roughly 600 basis points.”
It’s worth noting that while Google Cloud remains about one-third the size of Amazon’s and Microsoft’s cloud businesses. The combined cloud revenue of these three providers offers the clearest view of the industry’s overall health and, by extension, software and AI spending. Together, they generated $68 billion in cloud revenue this quarter which is a 21% year-over-year increase.
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