Cloud suggests improving market for SaaS

We closely monitor Amazon, Microsoft, and Google’s cloud revenues to get a feel for where the market for software is going. Those companies cloud segments are Amazon’s AWS, Microsoft’s Intelligent Cloud, and Google Cloud Products. All three companies have reported Q1 financials, and commentary on their cloud products and what it tells us about the direction of software buying is below.

Microsoft. In Q3, AI was helping offset the trend of clients looking to save money on cloud spend. In Q4, Satya Nadella said “we’ve moved from talking about AI to applying AI at scale.” In Q1, he said “Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry.”

AWS. AWS said things were stabilizing during 2023. In Q1, there now appears to be new investment in cloud spend by customers. According to Andy Jassy “the combination of companies renewing their infrastructure modernization efforts and the appeal of AWS’s AI capabilities is reaccelerating AWS’s growth rate (now at a $100 billion annual revenue run rate)”

Google Cloud. It’s notable that Google’s cloud is about 1/3rd the size of the Amazon and MSFT, but the growth isn’t 3x or even 2x greater.

Overall. The combined Q4 revenue of all three providers is really the number to look at if we want to see the overall health of the cloud market and in our view, software spend. The three cloud providers combined did $61bln in cloud revenue in Q4, growing 20%. That growth is accelerating and all of it is a positive sign for overall software sales.

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