Tech giants in the transcript, how is the "cloud" battle going?

With the popularity of the "cloud" lifestyle under the influence of the epidemic, the importance of the cloud service market has become more prominent in the past year. The "cloud" giants represented by Amazon, Microsoft, and Google are chasing each other more and more intensely cloud pricing comparison 2022.

After Microsoft took the lead in releasing its second-quarter earnings report that exceeded expectations last week, yesterday, Amazon and Google handed over their 2020 transcripts. Among them, the cloud business has become the most concerned part of the earnings report without exception. It is worth noting that this is also the first time that Google has used Google Cloud as a separate division to disclose revenue and expenses for the past three years.

The release of detailed data also makes the status of the "cloud" of the three giants more clear. Overall, on the cloud track, Amazon is still taking the lead, Microsoft is still playing steadily, and Google is frantically burning money to overtake in corners.

Google Cloud: Growth and cash burn
The 2020 financial report handed over by Google this time can be said to be very eye-catching. Its total revenue in the fourth quarter was approximately $56.9 billion, an increase of 23% over the same period last year; net profit was $15.2 billion, an increase of 43%. In 2020, the annual revenue was US$182.5 billion, a year-on-year increase of 12%; the net profit was US$40.3 billion, a year-on-year increase of 17%. All indicators exceeded market expectations cloud pricing comparison 2022.

Among them, the advertising business is still the top priority of Google, which increased by 22% in the same period in the fourth quarter, accounting for 81% of the total revenue. In particular, YouTube's advertising revenue rose by 46% under the "bonus" of the epidemic. Under the strong growth of the advertising business, it also swept away investors' concerns about Google's weak growth. After the opening bell on Wednesday, Google once soared 9%, and its stock price also stood at a record $2,000.

Google's share price hits $2,000 on the back of the earnings report
Starting this quarter, Google has also updated the format of its earnings report, dividing its business into Google Services (advertising, search, maps, YouTube, etc.), Google Cloud (Google Cloud Platform, collaboration tools, etc.) and Other Bets (Google X, venture capital, etc.) three major sectors. This division also shows, to a certain extent, the improvement of Google Cloud's internal strategic position cloud pricing comparison 2022.

Previously, Google Cloud data has been relatively mysterious, until last year Google began to publicly disclose the revenue of the cloud business. This financial report also allows everyone to more clearly understand the development curve of Google's cloud business in recent years cloud pricing comparison 2022.

Overall, Google Cloud maintained strong growth momentum, both quarterly and yearly. Its total annual revenue has grown rapidly from about US$4 billion in 2017 to more than US$13 billion, and the growth rate has remained above 40% in the past three years cloud pricing comparison 2022. Although the cloud business currently accounts for a relatively small proportion of Google's total revenue, it has grown significantly, and its proportion has expanded from 3.6% in 2018 to 7.2% in 2020. It is the fastest growing department in all of Google's businesses.

Silicon Star based on Google's public financial report drawing Silicon Star based on Google's public financial report
However, under the crazy money-burning strategy, when will Google Cloud be profitable, there is still a question mark.

Along with the growth in revenue, Google Cloud's losses have also expanded year after year. In 2020, Google Cloud lost more than $5.6 billion in total, an increase of 20% compared to 2019. You must know that AWS and Azure next door started to make money for the company a few years ago. Alibaba Cloud, which was built almost at the same time as Google Cloud, also "has been a daughter-in-law for many years" and said yesterday that it has achieved 24 million yuan for the first time. profit.

Google Cloud's losses are expanding year by year. The picture is taken from Google's financial report. Google Cloud's loss is expanding year by year. The picture is taken from Google's financial report.
Google Cloud's huge spending is mainly for the construction and operation of data centers. In recent years, Google has massively expanded its data center network in order to improve its position in the cloud computing market. At present, Google has 21 data centers, and is also building two new data centers in Oregon and Japan. According to related news, in the next year, Google will add another 10 data centers by renting equipment or building by itself.

Therefore, under the huge cost expenditure, Google Cloud still has to rely on the subsidy of the core business to survive, and it should be difficult to achieve profitability in the next few years.

While seeking its own profit breakthrough, Google Cloud also needs to face competition from strong competitors such as Amazon AWS and Microsoft Azure.

Amazon still leads, Microsoft, Google accelerate to catch up
Judging from the market share of cloud computing, since Amazon was the first to enter the commercial cloud market, the first-mover advantage is still obvious. According to existing data analysis, in 2020, AWS currently holds about 50% of the public cloud infrastructure market, followed by Microsoft Azure with about 20% of the market, and Google Cloud is close behind.

2020 market share estimates for AWS, Azure and Google Cloud, image from DInCloud AWS, Azure and Google Cloud 2020 market share estimates, image from DInCloud
Compared with Google Cloud's annual revenue of 13 billion US dollars, AWS's revenue in the fourth quarter alone reached 12.7 billion US dollars, and its net profit reached 3.56 billion US dollars. And AWS's revenue of $45.37 billion in 2020 is more than three times higher than Google Cloud's.

AWS's internal presence within Amazon is also growing day by day. In Amazon's existing business, cloud computing has become the main source of profit, contributing more than half of the company's operating profit. This time, Bezos announced that he will resign as Amazon CEO and will be replaced by Andy Jassy, ​​the director of AWS. It can also be seen that cloud services will become Amazon's most important strategic direction in the future.

As the first technology giant to enter cloud computing, Amazon has a dominant position in the public cloud market, has the world's most comprehensive data center network, and has a huge business scope, making it the world's most mature enterprise cloud provider. For now, AWS is still far behind its competitors in this race.

To say who can pose a threat to AWS now, it may only be Microsoft. As a "steady" top student, Microsoft is also secretly making efforts in the cloud business. In Microsoft's second quarterly report released last week, the strong performance of the cloud business "provoked the lead" in the financial report.

Among the revenue of various businesses, the revenue of Microsoft's intelligent cloud business unit totaled 14.6 billion US dollars, accounting for 33.87% of the total revenue in the quarter, an increase of 23% over the same period last year, the fastest revenue growth of all departments . Among them, the cloud platform Azure revenue growth rate rebounded to 50%, which also directly drove the server product and cloud service business to grow by 26% year-on-year in this quarter.

Compared with Amazon, Microsoft entered the cloud market relatively late, and only officially launched Azure in 2010. However, with Microsoft's huge customer base, by grafting Windows, Office, SQL Server and other software with cloud services, Azure entered the market after entering the market. In just a few years, it has grown by leaps and bounds, quickly becoming the second largest cloud provider after AWS.

In terms of growth rate in recent years, Microsoft Azure's growth rate is faster than AWS and Google Cloud, and the growth is very stable. The strategy of positioning as a global public cloud "operating system" (PaaS) has also embarked on a differentiated competitive route with AWS's strategy of focusing on cloud infrastructure (IaaS). Therefore, the intelligent cloud is also considered to be a new revenue pillar for Microsoft in the future.

In fact, compared with Amazon and Microsoft, Google was the first technology company to propose the concept of cloud computing, but in the early days, Google spent a lot of energy on optimizing technology and products, and lost the opportunity to expand products and customers.

However, Google's advantage lies in its powerful artificial intelligence technology and data analysis capabilities. Coupled with the capital and aggressive market expansion strategy of data centers in recent years, Google Cloud's services and functions are also improving day by day. Although Google is still ranked third, it still has the possibility of accumulating in the later development.

In the cloud business, Google has also shown unusual ambitions. At the end of 2019, Google's management set a small goal of "world first" for Google Cloud: with a period of 2023, it is determined to beat Microsoft Azure and Amazon AWS.

Looking at the "cloud" battle of the three giants, its development can be described as different. Amazon's advantage is that it has seized the opportunity and its mature architecture, Microsoft's advantage is that it has a huge number of users in the ecosystem, and Google's advantage is that it is at the forefront of technology and rich and self-willed.

With the trend of personal and enterprise key data going to the cloud, the epidemic has also made more and more enterprises re-examine the necessity and urgency of digital transformation. The competition on the "cloud" track should only happen in the next few years. Fully enter the white-hot stage.

So, how long do you think it will take for Google Cloud to catch up with AWS, and is it possible to complete the small goal in 2023?

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