Building up big cloud businesses hasn’t been cheap—and there is no sign the spending will slow anytime soon.
Amazon , Microsoft and Google, the three largest so-called “hyperscale” providers of cloud-computing services, spent nearly $30 billion combined on capital expenditures and capital leases for the trailing 12-month period ended in September. That is up 12% from the same period last year. Not every dollar of that flows to their respective cloud offerings, but each company describes the cloud as a major area of investment for those funds.
It is little wonder why. Demand for cloud-computing services keeps growing. The market leader, Amazon Web Services, grew third-quarter revenue by 55% year over year to $3.2 billion. Microsoft, considered No. 2 after Amazon, said revenue at its Azure cloud business more than doubled in the September quarter, and Alphabet said the Google Cloud Platform unit was its fastest growing business in the period.
Neither Microsoft nor Alphabet break out specific financial data for their cloud businesses. Walt Pritchard of Citigroup estimates Microsoft’s Azure revenue was $750 million in the September quarter. Alphabet’s cloud business falls into its “other” category of its core Google unit, which reported $2.4 billion in revenue. That business also includes the Google Play online store and other items.
So Amazon still holds a comfortable lead in the cloud. But investors shouldn’t expect any of these three companies to slow their investments. Particularly Amazon, where profits from AWS offset its razor-thin retail margins as the company heads into a new investment cycle. More now than ever, the company needs its cloud to keep making rain.
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