Cloud leaders invest in datacentres as public clouds expand

Microsoft has posted revenue for Q3 2019 of $33.1bn, up 14%, while Amazon reported net sales for Q3 2019 of $70bn.

In a transcript of Microsoft’s earnings call, posted on the Seeking Alpha financial blogging site, Microsoft chief financial officer (CFO) Amy Hood said: “In our commercial business, we again saw increased customer commitment across our cloud platform. In Azure, we had material growth in the number of $10 million-plus contracts.

“Additionally, Microsoft 365 drove new customer adoption, as well as expansion in our existing customer base, given the strong value Office 365, Windows 10, and enterprise mobility and security.” Overall, Hood said Azure revenue increased 59%.

As Computer Weekly has previously reported, Microsoft recently signed a deal with SAP, in which organisations running SAP’s ECC ERP system will be able to run a hosted version of SAP’s next generation S/4Hana ERP on the Azure Cloud. 

For Amazon company CFO Brian Olsavsky reported an increase in operating margin of over 30% in Q3 2019. According to the company’s disclosure in its 10-Q filing, Olsavsky said AWS customers had committed to spending $27 billion going forward on Amazon’s public cloud – an increase of 54% since 2018. 

In response to a question during the company’s earnings call about ongoing investment, posted on Seeking Alpha, Olsavsky said: “The biggest impact that we saw in Q3 year-over-year in the AWS segment was tied to costs related to sales and marketing year-over-year, and also to a secondary extent, infrastructure, which if you look at our capital leases or equipment leases line, grew 30% on a trailing 12-month basis in Q3 of this year.”

Olsavsky said Amazon made a “step up in infrastructure costs” to support higher usage demand. He anticipated that the company would continue this investment during Q4.

AWS is collaborating with VMware to provide a hybrid software defined datacentre for existing VMware customers who want to move some of their workloads to the public cloud. Updates to this strategy were presented during the recent VMworld conference in the US.

As Computer Weekly’s sister title, SearchVMware recently reported, there are now improved workflows to migrate workloads across regions. AWS now also supports vRealize Operations for workload balancing.

Commenting on the results from the two leading public cloud providers, John Dinsdale, chief analyst and research director at Synergy Research Group, said:

“The key thing is that the cloud market continues to grow at an impressive rate. The total market size in Q3 was just a little shy of $25 billion, meaning that in October the annual revenue run rate has already blown through the $100 billion mark.”

The analyst firm said it expects the total 2019 market size to increase faster than its original forecast.

“Both Amazon and Microsoft turned in some very strong Q3 numbers,” he said. “Relative to Q1 and Q2, both will nudge up their share of the worldwide market – Amazon moving to around a 33.5% share and Microsoft to around 16.5%. It is also notable that both have increased their capital expenditure relative to 2018, driven by continued aggressive buildout of their datacentre footprint.”