Here’s My Take On Cloud Giants’ Latest Numbers

I was away last week (perks of gardening leave), so here’s a quick results rundown for you:

Summary:

Conditions remain more challenging than a few years back, but are improving and there was notable positivity. Oh, and of course, GenAI was everywhere….

Grading Google

First up, Google.

4th Q. Cloud hit $9.2bn, up 26% on the period in 2022, with $864m of profit. Full year cloud revenues were $33bn, noting “accelerated growth, driven by our gen AI and product leadership”.

A couple of interesting snippets from [Alphabet CEO] Sundar [Pichai]:

“As we enter the Gemini era, the best is yet to come”. Gemini will be merging into DuetAI “soon”.

Also: “the [GCP customer] cost optimisations in many parts are something we have mostly worked through”

Overall business performance was positive for Alphabet, beating expectations slightly…but shares dipped a bit anyway because ad revenues were marginally lower than expected and costs (due to AI spend) will be “notably larger” in 2024. They’ll bounce back, it was a good set of numbers with plenty of positive news.

Assessing AWS

Onto Amazon, also a 4th Q.

Mr Jassy was clear that for Amazon as a whole, “2023 was a really good year”.

AWS Q4 sales increased 13% over 2022 to a meaty $24.2bn..(!) and profit was $7.2bn. “margin improvement reflects our headcount reductions from earlier in the year and a slowdown in the pace of hiring.”

Over $90bn was generated by AWS in the year. Wow.

They were bullish: “we’re approaching an annualised revenue run rate of $100bn. We watched the incremental revenue … and in Q4 AWS added more than $1.1bn… which …. is more than any other cloud provider as far as we can tell.”

On AWS spend: “I think that the lion’s share of cost optimisation has happened.”

On GenAI: “we’re going to drive tens of billions of dollars of revenue over the next several years”

The AWS backlog is officially bananas now – sitting at over $155bn, up $45bn year over year. That spend needs to get spent!

The markets reacted positively to the sentiment and shares rose, notably following a strong festive trading period for .com.

Measuring up Microsoft

Last, but not least, Microsoft.

Q2 results. I have to mention their total company value – the market cap now exceeds three trillion dollars, which is vast, and appears likely to keep going up.

“Intelligent Cloud” generated nearly $26bn in the quarter, including Azure, SQL, Windows, GitHub, etc. Azure will be a double digit chunk of that, and grew around 30% vs. the prior year period. Interestingly “six points” of that cloud growth was directly tied to AI, which is impressive.

On Azure spend, Satya said: “That period of massive …. optimisation only, and no new workload start …. has ended at this point.”

Other AI: “We now have 53,000 Azure AI customers. Over one-third are new to Azure over the past 12 months”.

Well done to team Microsoft for a good period, including a massive gaming acquisition.

A lively start to 2024.
—
p.s. Ran out of new monkeys, so here’s a tiger from last week.