'Big 3' Public Cloud Providers Continue Their Explosive Growth

The "Big Three" public cloud providers continued to grow at a frantic pace at the end of 2020, as revealed by quarterly earnings reported by Amazon, Microsoft and Google.

Microsoft was the first to report, revealing on Jan. 26 that its second-quarter fiscal 2021 revenue for its commercial cloud activities came in at $16.7 billion, for a 34% year-over-year gain. Google's parent company Alphabet reported its fourth-quarter fiscal 2020 earnings on Feb. 2, with cloud revenue of $3.8 billion, growing from $2.6 billion in the third quarter. Rounding out the Big Three public cloud providers, Amazon Web Services (AWS) also reported its fourth-quarter fiscal 2020 results on Feb. 2 with cloud revenue of $12.7 billion, up by 28% year-over-year.

Leadership Shift at AWS

Alongside Amazon's earnings, the cloud giant announced that AWS CEO Andy Jassy is moving up the corporate ladder to become the CEO for all of Amazon, succeeding founder Jeff Bezos. Amazon has not yet named who will fill Jassy's role at AWS.

"We will be working on backfilling the AWS role, and we will talk more about that in the future," Brian Olsavsky, senior vice president and chief financial officer at Amazon, said during his company's earning call.

The fourth quarter of 2020 was a period of tremendous activity at AWS overall, with the public cloud giant announcing more than 180 new services and features at its three-week-long re:Invent virtual conference. Among the new services are hybrid cloud computing options as well as a new chaos engineering service to help improve resilience.

Google Cloud Struggling With Profitability

While Google is growing revenue for its cloud operations, that revenue is coming with high costs. Google's fourth-quarter fiscal 2020 is the first in which the company provided more details about its cloud operations financial metrics, including operating income.

Unlike the other two top public cloud providers, for the full fiscal 2020 year, Google Cloud had a net operating loss of $5.6 billion, $1.2 billion of which came in the fourth quarter. Alphabet Senior Vice President and Chief Financial Officer Ruth Porat put a positive spin on the cloud numbers during her company's earnings call.

"Cloud's operating loss reflects that we have meaningfully built out our organization ahead of revenues, with respect to the substantial investments in our go-to-market organization as well as engineering and technical infrastructure," Porat said. "Operating loss and operating margin will benefit from increased scale over time."

Porat added that Google Cloud is focused on delivering on its own efficiency efforts across the board to contribute incrementally to profitability over time.

Cloud Spending Up 35% Overall

According to an analysis by Synergy Research Group, enterprise expenditures on cloud infrastructure services grew in the fourth quarter of 2020 by 35% on a year-over-year basis.

“2020 ended with a bang for the cloud market, as the sequential jump of $4 billion from Q3 easily set a new record for cloud providers' incremental revenue growth,” said John Dinsdale, a chief analyst at Synergy Research, in a release. "Amazon and Microsoft tend to overshadow the market, with Amazon share staying at well over 30% and Microsoft growing its share from 10% to 20% over 16 quarters."