What if I told you Microsoft’s committed revenue has soared by 14%? 🏆That's the real story this week, while Wall Street analysts' attention was focused elsewhere. If you're in partnerships, these cloud commitments of hyperscalers are key. Let's take a look at our quarterly tracker.
💳 What are cloud commitments, you might ask?
They are the 2 to 10-year contracts that hyperscalers like Amazon Web Services (AWS), Microsoft, and Google sign with their cloud clients. These commitments not only represent future revenue but also may serve as a barometer of their customer confidence.
Importantly, customers of hyperscalers can also use these commitments to purchase 3rd-party software and services via their marketplaces. This alone makes a compelling case for selling SaaS/services via these platforms.
📊 Despite economic headwinds, Google Cloud and Microsoft Azure reported respectable quarterly growth of 28% and 26% respectively. The intense competition to secure a dominant position in AI is driving this growth in the cloud market, which is beneficial for customers and the economy at large.
Here's a snapshot of the QoQ commitment updates (check slides for company quotes):
Google Cloud
Revenue: $8Bn vs $6.3Bn 🔺
Cloud commitments: $60.6 Bn vs $61.7 Bn 🔻
While Google Cloud's QoQ revenue increased by $1.7Bn, their commitments dipped slightly by $1.1Bn. It seems Google converted slightly more cloud sales this quarter than the long-term backlog they generated.
📈 Meanwhile, Microsoft's commits backlog surged by 14%
Microsoft Cloud
Revenue: +26% 🔺
Cloud commitments: $224 Bn vs $196 Bn (+14%) 🔺
MSFT has been diligently shipping AI copilots and building on top of their partnership with OpenAI. The result? Their backlog is up by a impressive $28B.
One important caveat is that MSFT discloses the total figure of commitments across their range of services, not just Azure Cloud.
However, considering Satya Nadella’s comment, "Microsoft Cloud surpassed $110 billion in annual revenue, up 27% in constant currency, with Azure all up accounting for more than 50% of total for the first time," it's clear Azure cloud growth is powering the revenue. This 14% increase in long-term customer commitments likely correlates directly to Azure.
💡 The strong QoQ revenue growth for both Google Cloud and MSFT, along with a significant boost in commits for MSFT, shows that customers are making long-term commitments to AI and the shift to the cloud.
This will undoubtedly fuel the overall economy.
If you're still considering whether to partner with hyperscalers, now is an excellent time.
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