Cloud Earnings

What Q3 Earnings Tell Us about Public Cloud

The recent earnings reports from the top three public cloud providers, Amazon Web Services (AWS), Microsoft, and Google Cloud, shows that the overall public cloud market remains robust and is starting to show signs of increased growth after several quarters of shrinking growth.

Earnings: Amazon Web Services (AWS)

AWS reported a 12% year-over-year growth in Q3, with $919 million in incremental quarter-over-quarter revenue. This revenue growth is among the highest in the industry.

Amazon president Andrew Jassy said in the earnings call that he remains optimistic about the medium and long-term prospects for AWS, citing its extensive functionality, large partner ecosystem, robust security, operational performance, and customer-focused approach. Amazon believes that as more IT spending shifts from on-premises to the cloud, there is significant growth potential for AWS.

Additionally, Amazon sees a substantial opportunity in generative AI for AWS, expecting the technology to generate tens of billions of dollars in revenue over the next few years. The company’s unique and broad approach to generative AI, along with its fast-growing presence in this field, has contributed to its optimistic outlook and successful deal signings.

Overall, AWS is seeing a stabilization of its year-over-year growth rate and a notable reduction in customer optimization levels. The company attributes its optimism to its extensive functionality, robust partner ecosystem, security, customer-focused approach, and the ongoing shift of IT spending from on-premises to the cloud.

Earnings: Microsoft Azure

Microsoft’s overall cloud revenue reached $31.8 billion, growing by 24%, exceeding analyst expectations. The gross margin percentage increased slightly year-over-year to 73%, primarily due to improvements in Azure. Company-wide gross margin dollars increased by 16%, with a gross margin percentage of 71%, partly driven by Azure and Office 365 (Microsoft doesn’t break out Azure earnings, but rather combines Azure with its other cloud-based businesses).

Microsoft expects Azure revenue growth to be around 26% to 27% in constant currency, with a growing contribution from AI. The Azure consumption business remains a key growth driver. The company anticipates stable Azure revenue growth for H2, assuming ongoing trends and increased contributions from AI.

In the on-premises server business, flat revenue growth is expected, driven by hybrid demand in multi-cloud environments, while Enterprise and Partner Services revenue may decline moderately.

Microsoft’s Azure cloud platform continues to gain market share as more organizations migrate their workloads to the cloud. Azure boasts a comprehensive global cloud footprint with over 60 data center regions, making it one of the largest cloud providers. It is also recognized for having a robust AI infrastructure for both training and inference.

Earnings: Google Cloud

In Q3, Google Cloud reported revenue of $8.4 billion, a 22% increase; this is the slowest growth since at least the first quarter of 2021. This was slightly below Wall Street estimates of $8.62 billion. Google Cloud’s operating income for the quarter was $266 million, with an operating margin of 3%.

Like its public cloud competitors, Google also sees increased momentum coming from the current boom in AI infrastructure. Google Cloud offers advanced AI-optimized infrastructure to train and deploy models at scale, with over half of funded generative AI start-ups being its customers.

Google has also been steadily building its AI capabilities. Its Vertex AI platform, for example, helps customers build, deploy, and scale AI-powered applications, offering more than 100 models and tools for various use cases. The number of active generative AI projects on Vertex AI grew significantly from Q2 to Q3.


AWS remains the big winner. With its 12% year-over-year growth and strong focus on generative AI, protects its position as a revenue growth leader and anticipates significant potential in the on-going shift from on-premises to cloud-based solutions.

Microsoft’s Azure is gaining market share and driving growth, while Google Cloud is starting to show traction within enterprise, especially in the AI infrastructure sector, where it is attracting a growing number of generative AI start-ups.

Despite its overall momentum, Google’s cloud business is underperforming relative to its competitors while also failing to meet Wall Street expectations.

The public cloud market remains highly competitive, with each major player experiencing sustained growth and innovation. Amazon continues to dominate the market, while Microsoft shows commendable growth. Every CSP highlights the positive impact that AI is having on their respective businesses.

Whatever the cause, the public cloud market is showing nice signs of growth. It’s good to see the uptick. Let’s hope this is the start of a long and healthy trendline for the overall public cloud market.

Disclosure: The author is an industry analyst, and NAND Research an industry analyst firm, that engages in, or has engaged in, research, analysis, and advisory services with many technology companies, which may include those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.