AI fuels cloud computing boom for tech giants
Send a link to a friend
[May 01, 2024] By
Yuvraj Malik
(Reuters) - Three of the Wall Street's heavyweight technology firms have
reported better-than-expected sales at their cloud computing units in
recent days, as interest in artificial intelligence drives a rebound in
spending by corporate customers.
Growth in the $270 billion cloud infrastructure market, a cash engine
for Amazon.com, Microsoft and Alphabet, gives the clearest sign yet that
AI investment is bearing fruit after investors drove those stocks to
record highs, thanks to optimism about the emerging technology.
Many big customers have started spending again on cloud computing after
pausing last year to cut costs, executives and analysts said.
Amazon, the last of trio to report on Tuesday, said its cloud computing
arm AWS grew 17% in the January-to-March period, above Wall Street's 15%
growth estimate, and hit a $100 billion annual run-rate for the first
time.
Performance was consistent at Microsoft's Azure and Google Cloud, which
grew above expectations at 31% and 28%, respectively, in the first three
months of the year.
"Looking across AWS, Microsoft Azure and Google Cloud, it is clear that
two things are happening simultaneously – AI is contributing to growth,
but also the rest of cloud spending is accelerating,” said D.A. Davidson
& Co analyst Gil Luria.
For several years cloud infrastructure providers enjoyed growth rates as
high as 60% and demand shot up during the COVID-19 pandemic as more
businesses moved online. However, firms had to realign expectation last
year as customer pulled back spends in an increasingly challenging
business environment.

[to top of second column] |

An AI (Artificial Intelligence) sign is seen at the World Artificial
Intelligence Conference (WAIC) in Shanghai, China July 6, 2023.
REUTERS/Aly Song/File Photo

The industry has been at the forefront of adopting AI and customers
had begun to buy the new functionality at a rapid pace, executives
said.
"The number of Azure AI customers continues to grow and average
spend continues to increase," Microsoft CEO Satya Nadella said on
the company earnings call, adding that more than 65% of the Fortune
500 companies were Azure OpenAI Service customers.
AI services contributed 7 percentage-points in growth to Azure, up
from 6 percentage points in the Oct-Dec quarter.
More than 60% of funded generative AI startups and nearly 90% of
genAI unicorns were using Google Cloud, Alphabet CEO Sundar Pichai
said on his company's earnings call last week.
"There is an inevitable and continuous migration of workloads to the
cloud and consolidation of IT spending going towards large
platforms, including the hyperscalers," said RBC Capital Markets
analyst Rishi Jaluria.
Hyperscalers are cloud providers with a large network of data
centers and wide range of services, and are often preferred for
end-to-end workload support.
(Reporting by Yuvraj Malik in Bengaluru; Editing by Lincoln Feast.)
[© 2024 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |