Google’s cloud business saw significant growth in the latest quarter, outpacing larger rivals Amazon Web Services (AWS) and Microsoft Azure as demand for artificial intelligence (AI) services continues to surge. In the third quarter, Google’s cloud business, which includes infrastructure as well as software subscriptions, grew 35% year over year to $11.35 billion, accelerating from 29% in the prior period. This growth marks a key sign for investors that the internet giant is gaining traction in the AI sector.
AWS, the market leader in cloud services, recorded growth of 19% to $27.45 billion, though its expansion rate is about half as quick as Google’s. AWS continues to be a major profit driver for Amazon, with a notable operating margin of 38%. Microsoft’s revenue from Azure and other cloud services grew but not at the same pace.
Microsoft had to start isolating Azure public cloud revenues more accurately by excluding sales from other services like mobility, security, and Power BI data analytics. Microsoft’s AI efforts, however, are noteworthy. As the lead investor in OpenAI, the creator of ChatGPT, Microsoft is significantly benefiting from the demand for AI services.
“Demand continues to be higher than our available capacity,” Amy Hood, Microsoft’s finance chief, stated during the company’s earnings call. While Azure’s growth may moderate in the short term, it is expected to pick up in the first half of 2025 as more capital investments are made to accommodate growing AI demands.
Google cloud gains AI momentum
Amazon has also faced similar capacity challenges. AWS CEO Andy Jassy mentioned that both chips and infrastructure supply were critical areas where demand exceeded supply. To mitigate this, Amazon has been leveraging its proprietary processors alongside Nvidia’s GPUs.
Jassy reported that clients have shown considerable interest in Amazon’s Trainium processors for AI model training. Meanwhile, Google continues to advance its AI infrastructure, with CEO Sundar Pichai expressing optimism about the company’s custom tensor processing units (TPUs). Google is currently on its sixth generation of these TPUs, which are essential for Google’s AI-driven services.
Despite the fierce competition, analysts believe Microsoft’s prospects against Google and Amazon in the AI cloud sector remain challenging. A note from DA Davidson highlighted the tough landscape for Microsoft in this arena, giving them a neutral rating. Oracle, which generally ranks fourth among U.S. cloud infrastructure providers, is expected to report quarterly results in December.
Previously, Oracle’s cloud infrastructure revenue reached $2.2 billion, reflecting 42% growth. The company has recently partnered with its bigger cloud rivals to make its databases available on their platforms, a move that Chairman Larry Ellison believes will significantly boost their database business.
