Microsoft Creeps Closer To AWS As The Cloud's Top Dog
Microsoft is cutting into AWS’ lead at the top of the cloud food chain.
While the big three cloud providers — AWS, Microsoft and Google — all posted strong fourth-quarter numbers — it was Microsoft that continued to cut into AWS’ commanding lead in overall market share, according to a report released by Synergy Research Group.
Microsoft grew relative to AWS and has now grown its slice of the global cloud market by 9% since 2018, the report found. Overall cloud spending has continued to grow at a feverish pace, with enterprise spending on cloud service up 36% from the fourth quarter of 2020.
“It is a strong testimony to the value and attractiveness of cloud services that the 2021 market growth rate actually exceeded 2020 growth, despite the enormous scale that has already been achieved,” Synergy Research Group Chief Analyst John Dinsdale wrote in the report. “The rising tide continues to lift all boats, but some are being lifted more swiftly than others.”
Amazon’s status at the top of the cloud food chain isn’t going away any time soon, but Microsoft is creeping closer. The Seattle company now controls 21% of the global cloud market, up from 20% last quarter, according to Synergy. That’s just 11% behind industry leader AWS, which has controlled around a third of the market for the last several quarters.
Microsoft’s gains come in the wake of a strong Q4 earnings report. While the company doesn’t report numbers from their Azure cloud products independently — instead combining them with performance figures from a number of other web-based productivity tools — revenue from those combined products and services was up around 26% to $18.3B in Q4. Capital expenditures were up 25% year-over-year at $6.8B, reflecting the company’s aggressive build-out of data centers and other infrastructure to support Azure.
Despite being outpaced slightly by Microsoft, AWS continued to grow faster than the overall market through Q4 with revenue up 39.5% for the year. This comes despite AWS outages making headlines in recent months. The company recorded $17.8B in quarterly earnings, a 10% increase from the previous quarter.
While AWS reported an astounding $19B in capital expenditures in Q4, digital infrastructure accounts for around $7.6B of that figure. Additionally, the numbers include digital infrastructure to support operations for various Amazon products — as opposed to being purely for cloud services infrastructure. Still, the capital expenditure numbers — up 250% since 2019, according to the Foundations newsletter — do reflect an aggressive data center build-out that executives say will continue into 2022 and beyond.
Google remains in a distant third place in overall market share at around 10%, according to Synergy. But while Google’s cloud revenue was up 45% year-over-year at $5.5B, that growth continues to come at a price. Google’s cloud services lost $840M in Q4, and have operated at a loss since the company began disclosing the division’s financial performance in 2018. AWS and Microsoft both turned profits from their cloud divisions.
According to Synergy, the fourth quarter saw the biggest three cloud providers continue to edge out smaller companies for control of the overall market, with AWS, Microsoft and Google accounting for 64% of total spending on cloud services. And the amount companies are spending on the cloud keeps going up. Enterprise spending on cloud totaled $178B in 2021, according to Synergy, up 37% from 2020.
“Enterprises are now spending twice as much on cloud services as they spend on their own data centers,” Dinsdale said.