On the heels of the big AWS re:Invent conference in Las Vegas early this month, cloud computing leader Amazon posted significant gains in its cloud business for the quarter ending September 30. Overall, the company swung to another surprise profit, which gave the stock a healthy jump as well.
Microsoft, meanwhile, saw overall sales decline, but said its Windows Azure and other cloud computing products delivered strong growth. The results were enough to push MSFT stock to 15-year highs.
Despite the fact that HP dropped out of the public cloud race with its plans to shut down Helion Public Cloud next year, the success from Amazon and Microsoft adds up to yet another strong indication that cloud computing's momentum continues to accelerate. The cloud isn't just mainstream, it's increasingly the default option.
More than one winner?
For Amazon, the quarterly earnings reiterate the company's dominance of the cloud and the overall growth in the sector. Amazon Web Services sales jumped 79% to $2.09 billion, easily topping analyst expectations of less than $2 billion, per the Wall Street Journal. AWS showed an operating profit of $521 million, rivaling its North American retail operations. (At AWS re:Invent, Amazon SVP Andy Jassy had claimed 81% year-over-year growth, with 1 million active customers and a $7.3 billion annual run rate.)
Microsoft remains a distant second in the cloud race, but that doesn't mean its Azure cloud business isn't doing well, too. Quarterly sales at the company's Intelligent Cloud division, which includes Windows Azure as well as Office 365, grew 14%, adjusted for currency fluctuations, to $5.9 billion—better than expected. Critically, per the Wall Street Journal, on-premise software sales in the group fell 8% while Azure revenue almost doubled, and Microsoft 365 sales grew 70%. Microsoft CEO Satya Nadella told analysts that the company's cloud businesses enjoy an annual revenue run rate of $8.2 billion and are on track to hit the company's $20 billion target.
This kind of growth from both Amazon's and Microsoft's cloud businesses proves that there's plenty of potential in the cloud market for more than one leader. But HP's exit from the market shows that you need scale and differentiation to compete, just showing up with a workable product isn't enough. Add in the repercussions of Dell's giant purchase of EMC (which comes with most of VMware), and things should be very interesting in the cloud in the coming months and years.