cloud infrastructure market share
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In spite of pandemic (or maybe because of it), cloud infrastructure revenue soars
It’s fair to say that even before the impact of COVID-19, companies had begun a steady march to the cloud. Maybe it wasn’t fast enough for AWS, as Andy Jassy made clear in his 2019 Re:invent keynote, but it was happening all the same and the steady revenue increases across the cloud infrastructure market bore that out.
As we look at the most recent quarter’s earnings reports for the main players in the market, it seems the pandemic and economic fall out has done little to slow that down. In fact, it may be contributing to its growth.
According to numbers supplied by Synergy Research, the cloud infrastructure market totaled $29 billion in revenue for Q12020.
Image Credit: Synergy Research
Synergy’s John Dinsdale, who has been watching this market for a long time, says that the pandemic could be contributing to some of that growth, at least modestly. In spite of the numbers, he doesn’t necessarily see these companies getting out of this unscathed either, but as companies shift operations from offices, it could be part of the reason for the increased demand we saw in the first quarter.
“For sure, the pandemic is causing some issues for cloud providers, but in uncertain times, the public cloud is providing flexibility and a safe haven for enterprises that are struggling to maintain normal operations. Cloud provider revenues continue to grow at truly impressive rates, with AWS and Azure in aggregate now having an annual revenue run rate of well over $60 billion,” Dinsdale said in a statement.
AWS led the way with a third of the market or more than $10 billion in quarterly revenue as it continues to hold a substantial lead in market share. Microsoft was in second, growing at a brisker 59% for 18% of the market. While Microsoft doesn’t break out its numbers, using Synergy’s numbers, that would work out to around $5.2 billion for Azure revenue. Meanwhile Google came in third with $2.78 billion.
If you’re keeping track of market share at home, it comes out to 32% for AWS, 18% for Microsoft and 8% for Google. This split has remained fairly steady, although Microsoft has managed to gain a few percentage points over the last several quarters as its overall growth rate outpaces Amazon.
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AWS hits $10B for the quarter putting it on a $40B run rate
AWS, the cloud arm of Amazon, would be a pretty successful business on its own. Today, the company announced it has passed $10 billion for the quarter, putting the cloud business on an impressive run rate of more than $40 billion.
It was a bright spot for the company in an earnings report that saw it report net income of $2.5 billion, down $1 billion from a year ago.
Still, most companies would take that for the entire business, but AWS, which started off as kind of a side hustle for Amazon back in 2006, has grown into a powerful business all on its own. With a growth rate of 33%, it’s still growing briskly, even if it’s slowing down a bit as the law of large numbers begins to work against it.
Even though Microsoft has grown more quickly — in yesterday’s report Microsoft reported that Azure was growing at a 59% clip — AWS had such a big head start and controls a big chunk of the market share.
To give you a sense of how quickly this business has grown, Bloomberg’s Jon Erlichman tweeted the Q1 numbers for AWS since 2014, and it’s pretty amazing growth:
Amazon’s cloud revenue in Q1:
(Amazon Web Services)
Q1 2020: $10.2 billion
Q1 2019: $7.7 billion
Q1 2018: $5.4 billion
Q1 2017: $3.7 billion
Q1 2016: $2.6 billion
Q1 2015: $1.6 billion
Q1 2014: $1.1 billion— Jon Erlichman (@JonErlichman) April 30, 2020
In 2014, it was a $4 billion a year business. Today it is 9.1x that and still going strong. The good news for everyone involved is that this is a huge market, and while nobody could ever characterize the pandemic and it’s economic fall-out as good news for anyone, the fact is that it is forcing companies to move to the cloud faster than they might have wanted to go.
That should bode well for all the cloud infrastructures vendors, even as the economy shrinks, the kinds of services these vendors offer should be in more demand than ever, and that means these numbers could just keep growing for some time.
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In surprise choice, Zoom hitches wagon to Oracle for growing infrastructure needs
With the company growing in leaps and bounds, Zoom went shopping for a cloud infrastructure vendor to help it with its growing scale problem. In a surprising choice, the company went with Oracle Cloud Infrastructure.
Zoom has become the go-to video conferencing service as much of the world has shut down due to the pandemic, and life needs to go on somehow. It has gone on via video conferencing with Zoom growing from 200 million active users in February to 300 million in March. That kind of growth puts a wee bit of pressure on your infrastructure, and Zoom clearly needed to beef up its game.
What’s surprising is that it chose Oracle, a company whose infrastructure market share registers as a strong niche player in Synergy Research’s latest survey in February. It is well behind market leaders including Amazon, Microsoft, Google, and even IBM (and that’s saying something).
Brent Leary, who is founder at CRM Essentials, says he sees this as a move to show that Zoom can move beyond the SMB market to power enterprise customers, no matter what they demand.
“I think Zoom went with Oracle because they are proven in the enterprise in terms of mission critical apps built on Oracle databases running on Oracle hardware in the cloud. Zoom needs to prove to enterprises that they are able to handle scale and data security needed to beyond what SMBs typically require,” Leary told TechCrunch.
In addition, Leary speculated that Oracle might have given Zoom a good deal to get a hot company into the fold and beat rivals like Amazon and Microsoft.
It’s worth noting that CNBC reported a couple of weeks ago that Oracle chairman Larry Ellison called Zoom an “essential service” for his business, as well as others. It certainly seems in hindsight that was hardly a coincidence, as he was praising up his new prize customer.
Others have speculated that it might have to do with keeping business away from a potential rival given that Amazon with Chime, Google with Hangouts and Microsoft with Teams all have competing products. However, none of them have become synonymous with online meetings as Zoom has during this crisis.
Zoom went public last year and has become the darling of the video conference market since in spite of a set of security issues that have developed as the company scaled, which they have been working to address.
The stock market is apparently not impressed with the choice. As we went to publish, the stock was down 3.38% or $5.56.
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