AWS Earnings in Perspective: Is Amazon Losing Ground to Microsoft, Google?
Amazon’s recent earnings, which showed less AWS growth than analysts expected, have stirred up some skittish speculation – is the behemoth granddaddy of cloud ceding market share to rivals?
The answer does not boil down to something so simple as a blanket yes or no.
Rather, AWS has come up against inevitable realities as the whole cloud market evolves. As cloud proves itself as a core business technology, more providers are stepping up to meet demand. Everyone, from AWS and Google Cloud to Microsoft Azure, IBM, Tencent and others, is adding customers.
The question, then, is not so much whether AWS is falling behind; it’s more about how much ground rivals are gaining and how observers may need to shift their expectations for AWS.
Time to Temper High Hopes
Let’s be clear: AWS is in no way faltering. It reported $8.4 billion in sales – representing not-so-shabby 37% growth – for the second quarter of 2019. And it still claims one-third of the market, according to Synergy Research Group.
The thing is, many investors and analysts had hoped for another quarter of 50% growth.
AWS is reaching maturity. Founded in 2006, the cloud provider has had more time than Microsoft and Google to refine its technology and offerings, and build a customer base. Meanwhile, in the intervening years, competitors have burst onto the scene. Skyrocketing growth can only continue for so long. Even giants butt up against the laws of physics – or, in this case, business.
Patrick Moorhead, president and principal analyst of Moor Insights & Strategy agreed.
“The larger the numbers get, the harder it is to keep the percentage rate increasing,” he told Channel Futures. “This isn’t true just for AWS; it’s also true for Azure and any other large and growing business.”
Again, keep in mind that AWS sales were no small fry.
“Compared to Azure IaaS, based on my rough estimates, AWS revenue growth in dollars was likely two to three times larger,” Moorhead said. “While the growth percent declined a bit, the real dollar value of that growth is huge and much bigger than its competitors by a mile.”
Grant Kirkwood, CTO and co-founder of Unitas Global, which partners with AWS, Microsoft Azure and Google Cloud, concurred. AWS is facing the law of large numbers, meaning that 40% growth on, say, $7 billion, comes out to much more than 60% growth on $2 billion, he said.
“Their growth is nothing to shrug off,” he added.
Microsoft Azure, Google Cloud Are Gaining Speed
Still, none of this is to say that AWS doesn’t face competition. It does, and namely from Microsoft Azure. Even though Azure was the last major cloud platform to launch, four years after AWS and two years after Google Cloud, it is picking up significant traction.
“In early 2016, Microsoft was less than a quarter the size of Amazon in this market, while today it is getting close to being half the size,” said John Dinsdale, a chief analyst for Synergy Research Group, in a July 26 memo.
Indeed, Microsoft in July posted…