Tech giants, Amazon, Microsoft, and Google parent company, Alphabet, have reported sales exceeding expectations from their cloud computing units, signalling that their investments in artificial intelligence (AI) are beginning to pay off.
The cloud infrastructure market, worth $270 billion, has become a significant revenue generator for these companies, propelling their stocks to record highs and increasing optimism about the potential of AI technology.
Executives and analysts note that many corporate customers, who had previously scaled back spending to cut costs, are now resuming investments in cloud computing. According to Reuters, Amazon reported a 17% growth in its cloud computing arm AWS, surpassing Wall Street’s estimates and reaching a milestone of $100 billion in annual run-rate for the first time.
Similarly, Microsoft’s Azure and Google Cloud have also exceeded expectations, recording growth rates of 31% and 28%, respectively, in the first quarter of 2024. Analysts attribute this growth not only to AI-related investments but also to an overall acceleration in cloud spending across various sectors.
Microsoft CEO Satya Nadella highlighted the increasing adoption of Azure AI services, stating that more than 65% of Fortune 500 companies are now Azure OpenAI Service customers. AI services contributed significantly to Azure’s growth, accounting for 7 percentage points in the first quarter.
Alphabet CEO Sundar Pichai also noted the widespread adoption of AI services on Google Cloud, with a majority of funded generative AI startups and nearly 90% of genAI unicorns utilising the platform.
Cloud infrastructure providers had experienced rapid growth rates before the pandemic, but faced challenges as customers reduced spending in the face of economic uncertainties. However, the industry seems to have rebounded, with AI services playing a significant role in driving growth.
