Google, Microsoft, or Amazon: Who Is Ending 2020 on a Powerful Note?

Amazon, Microsoft, and Google continue to hold a dominant position in the lucrative cloud computing space with strong revenue and profit gains in Q3 2020.

On October 29, 2020, at the closing bell of the stock market, major public cloud providers, Amazon, Microsoft, and Google released their financial earnings reports for Q3 2020. Their strong revenue results indicated how the global pandemic had fueled the consumption of the public cloud.

• Amazon: AWS accountedOpens a new window for 12.1% of Amazon’s total revenue of $96.1 billion for Q3 2020. Compared to last quarter, AWS’s growth rate remained steady at 29%, with $11.6 billion cloud revenue.
• Microsoft: Microsoft reportedOpens a new window total revenue of $37.2 billion with commercial cloud revenues of $15.2 billion, up by 31% in year-on-year (YoY) growth.
• Google: Google’s parent company Alphabet reportedOpens a new window that its Google Cloud Platform revenue climbed to 45%, accounting for $3.44 billion, compared to $3 billion in Q2 2020 and $2.38 billion in Q3 2019.

The pandemic-driven cloud market has boosted other public cloud providers’ stocks too. In Q3 2020, IBM’s cloud business increasedOpens a new window to $6 billion, with 19% year-over-year growth; however, its total revenue declined to 2.6% with $17.65 billion. Similarly, SAP reportedOpens a new window a $2.33 billion cloud revenue, with an 11% increase in year-over-year growth. But its total revenue was down 4% to $7.7 billion year-over-year.

Also Read: Hybrid Cloud Settles In for the Long Haul. Here’s What to Consider Before Migration

The Growth of Cloud Computing in 2020

The pandemic forced every industry to rely heavily on technology in 2020, which especially brought cloud computing into the spotlight. Retail, telecom, and education industries were quick to adopt cloud computing, compared to regulated industries such as financial institutions and healthcare. A new survey by Centrify revealed that 48% of companies had to accelerate cloud migration during the pandemic. 

The transition from on-premise data centers to the cloud was exceptionally faster due to the high demand for video conferencing services, virtual desktop infrastructure, cloud security, and VPN. Cloud service providers such as Amazon, Google, Microsoft, Salesforce, ServiceNow, and IBM seized the profitable market opportunity and were clear winners in the new economy.

The immense growth opportunity pushed cloud service providers to make advances in their products and services. The demand for cloud infrastructure and collaboration tools played a critical role in Microsoft’s profitable revenues. Microsoft made investments in Kubernetes and GitHub to strengthen its Azure cloud capabilities. Besides, its reliable cloud services helped it win the Department of Defense (DoD) JEDI military cloud contract over Amazon in September 2020. With a market capitalization of $1.6 trillion, Microsoft is the second-most valuable U.S. company after Apple.

Meanwhile, Google’s revenue was resilient due to its long-term cloud strategy. From focusing on G Suite growth to making strategic cloud acquisitions, the company quickly weathered the pandemic and earned profits. However, the antitrust lawsuit filed by the Department of Justice against Google affected its market position.

Despite this, Sundar Pichai, CEO of Google, seemed optimistic about the company’s growth. In the company’s earnings call in October 2020, Pichai saidOpens a new window , “Regarding the DoJ’s lawsuit, we believe that our products are creating significant benefits and we’ll confidently make our case. Our company’s focus remains on continuing our work to build a search product that people love and value.”

Moving on to AWS, the company holds a dominant position in the cloud computing market and is best known for its exceptional infrastructure technology. AWS cloud infrastructure, such as data storage and computing, has helped its partners and clients in different verticals to sustain their business operations. Apart from supporting real-time communications such as Zoom and Slack, AWS cloud technology has supported COVID-19 genomic research, drug discovery, and development.

IBM has also made a strategic decision in this cloud race. Last month, on October 8, IBM announced to spin off its 109-year old managed infrastructure services business to focus on $1 trillion hybrid cloud computing and strengthen its position in the cloud market.

Also Read: Why Digital and Cloud Is the New Battleground for CSPs

Where Is the Cloud Market Heading?

Global Cloud Infrastructure Q3 2020
Source: CanalysOpens a new window

Last year, Gartner revealedOpens a new window that Amazon led the cloud infrastructure market with a 45% market share, followed by Microsoft (18%) and Google (5%). This year, a new report by Canalys found that AWS still holds a dominant position in the cloud computing space (32%), followed by Microsoft (19%), and Google (7%). The report also revealed that the worldwide cloud infrastructure market grew 33% to $36.5 billion in Q3 2020, $2 billion higher than Q2 2020. Interestingly, the transition from on-premises to the public cloud has got up to torrid speed due to the pandemic.

Owing to the second wave of coronavirus, some countries have initiated stricter lockdown measures, which indicates that cloud computing will continue to play a crucial role in business continuity, remote working and learning, cybersecurity, and customer engagement. This rise in cloud computing is likely to increase cloud spending. According to the 2021 State of IT report by Spiceworks Ziff DavisOpens a new window , IT decision-makers will allocate 32% of their overall tech spend towards cloud budgets in 2021. Cloud computing may also bolster emerging technologies such as 5G, IoT, and AI.

Both Microsoft and Google have entered the 5G race with strategic acquisitions and partnerships. In March 2020, Microsoft acquired Affirmed Networks to bolster 5G efforts. In the same month, Google Cloud launched Anthos for Telco to deliver a marketplace of 5G solutions in partnership with telecom companies.

Blake Murray, a research analyst at Canalys, sharedOpens a new window , “The convergence of cloud and 5G at the mobile edge will form the next wave of growth for leading cloud service providers. It also represents a new front for infrastructure buildout and competition between AWS with Wavelength, Microsoft Azure with Edge Zones, and Google Cloud with Mobile Edge Cloud. 

“All three are collaborating with mobile operators to deploy their cloud stacks at the edge in the operators’ data centers. These are part of holistic initiatives to profit from 5G services among business customers, as well as transform the mobile operators’ IT infrastructure.”

Cloud computing has become the digital engine of the modern economy. It is a lucrative, high-margin market, and every company wants to be a part of it. The three cloud giants have been the frontrunners in this space for a long time, and it will be a while before other companies match up to their monumental size. 

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