Written by Yuvraj Malik
(Reuters) – Three leading Wall Street technology companies reported better-than-expected sales for their cloud computing units in recent days, as interest in artificial intelligence fuels a rebound in spending among business customers.
Growth in the $270 billion cloud infrastructure market, the cash engine of Amazon.com, Microsoft, and Alphabet, is turning to AI after investors pushed these stocks to record highs thanks to optimism about emerging technologies. This is the clearest sign yet that the company's investments are paying off.
Many large customers are starting to spend on cloud computing again after pausing it last year to cut costs, executives and analysts say.
Amazon, the last of the three companies to report on Tuesday, saw its cloud computing unit AWS grow 17% from January to March, beating Wall Street's 15% growth forecast and pushing its annual run rate above 1,000 for the first time. announced that it had reached $1 billion. .
Microsoft's Azure and Google Cloud performance has been steady, beating expectations by 31% and 28%, respectively, in the first three months of this year.
“If you look across AWS, Microsoft Azure, and Google Cloud, it's clear that two things are happening at the same time: AI is not only contributing to growth, but also accelerating the rest of your cloud spend,” DA Davidson & Co analyst Gil Luria said.
For several years, cloud infrastructure providers have enjoyed growth rates as high as 60%, and demand soared during the COVID-19 pandemic as more businesses moved online. But last year, businesses had to readjust their expectations as customers cut back on spending in an increasingly challenging business environment.
The industry is at the forefront of AI adoption, and customers are rapidly purchasing new features, executives said.
“The number of Azure AI customers continues to grow, and the average spend continues to increase,'' Microsoft CEO Satya Nadella said in an earnings conference, adding that more than 65% of Fortune 500 companies were customers of Azure OpenAI Service. added.
AI services contributed 7 percentage points to Azure's growth, up from 6 percentage points in the October-December quarter.
Alphabet CEO Sundar Pichai said on an earnings call last week that more than 60% of funded generative AI startups and nearly 90% of genAI unicorns use Google Cloud.
“The continued migration of workloads to the cloud and the consolidation of IT spending onto large platforms, including hyperscalers, is inevitable,” said Rishi Jallia, an analyst at RBC Capital Markets.
Hyperscalers are cloud providers with large data center networks and a wide range of services, and are often preferred for end-to-end workload support.
(Reporting by Yuvraj Malik in Bengaluru; Editing by Lincoln Feast.)
