Cloud Surge Lifts Amazon, Google, Microsoft Results -- WSJ
01 August 2020 - 5:02PM
Dow Jones News
By Aaron Tilley
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 1, 2020).
Companies are increasingly looking to transform their digital
operations during the pandemic by placing bets that promise to
boost the cloud-computing businesses of Amazon.com Inc., Microsoft
Corp. and Google-parent Alphabet Inc. for years to come.
Posting quarterly results Thursday, No. 1 cloud vendor Amazon
said its backlog for cloud services in the second quarter was up
65% from a year earlier, accelerating from 58% growth in the
previous quarter and 54% in the second quarter last year. The
agreements have an average length of three years, the company
said.
"We're seeing migration plans accelerate," Amazon Chief
Financial Officer Brian Olsavsky told analysts.
Google, playing catch-up with Amazon in the cloud, said
computing-services sales cushioned the drop in its advertising
business as it reported its first-ever fall in quarterly revenue.
Almost all of Google's $14.8 billion backlog at the end of the June
quarter was linked to its cloud business -- whose revenue rose to
$3 billion from $2.1 billion a year earlier, Alphabet CFO Ruth
Porat said on an investor call Thursday.
"We had many large customers come onto cloud," Alphabet Chief
Executive Sundar Pichai said on the call. "Companies are deeply
thinking long-term and planning for it."
Businesses have been moving to the cloud in recent years to cut
spending, shifting from their own legacy hardware and software to
subscription-based remote data storage and online services --
enterprise tools including email and videoconferencing. Those have
only become more essential during the pandemic.
Large customers are particularly critical for cloud vendors now,
because the startups and smaller companies that were early adopters
of their services are among the hardest hit by the pandemic.
Posting full-year results last week, Microsoft, which is No. 2
in the cloud, said commercial cloud bookings grew faster than
expected. The chief driver was large, long-term contracts, Chief
Financial Officer Amy Hood said.
The cloud hasn't been impervious to the historic economic
downturn. Amazon and Microsoft both reported slower cloud-sales
growth than the previous year -- in part reflecting the scale their
businesses have achieved, but also new frugality among customers
hit hard during the pandemic.
"What we see is companies are working really hard right now to
cut expenses, especially in the more-challenged businesses like
hospitality and travel, but pretty much across the board," Amazon's
Mr. Olsavsky said.
Amazon's cloud business, AWS, reached $10.81 billion in sales in
the second quarter, up 29% from a year earlier -- short of 30% for
the first time since the company began breaking out the figures in
2015. Sales at Microsoft's flagship Azure cloud business advanced
47% in the latest quarter, slowing from 59% the quarter before and
64% a year earlier.
Amazon said it is working with its customers to save on cloud
costs. "We think that's the right thing to do not only for their
success, and so they can come out of this in better shape, but also
for the long-term health of our relationship with them as an AWS
provider," Mr. Olsavsky said.
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Write to Aaron Tilley at aaron.tilley@wsj.com
(END) Dow Jones Newswires
August 01, 2020 02:47 ET (06:47 GMT)
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