By now we know the cloud market is divided into the haves and the have-nots. Last week's earnings reports just highlighted this point as Amazon, Microsoft, and Google had great news — and everyone else, not so much.
Let's start with AWS, which has now generated more than $7 billion in revenue over the past 4 quarters — and it just keeps rolling along. While the cloud unit accounts for just 8 percent of Amazon's business, it accounted for 52 percent of profits last quarter. When AWS executive Andy Jassy boasted last year that some day AWS will be bigger than Amazon.com, he could be right.
Giving Google and Microsoft their due, they both appear to have done well, too. Microsoft's Intelligent Cloud unit, which includes Azure, was up 8 percent. Google was harder to brag about because it didn't actually break out its cloud numbers. But, it was talking cloud, and evidence suggests it's been doing well too, according to re/code.
As The New York Times reported, within an hour of reporting their earnings, the market cap of the big three blew up.
When the stock market closed on Thursday, Amazon, Google, and Microsoft — arguably the three largest cloud businesses — declared their quarterly earnings. One hour later, their collective market capitalization had grown by more than $100 billion because of their robust results, fueled partly by cloud growth.
The other side of the story
Those are the winners. The wannabes didn't fare quite as well. As Matt Rosoff from Business Insider pointed out in an analysis, "Amazon, Google, and Microsoft were all just far enough ahead of the curve to take advantage of this move [to the cloud]. Now, they're reaping the benefits," he wrote
The others aren't seeing the same results.
Let's start with HP, which quit the public cloud business once and for all last week. As the company prepares to split into HP, Inc. and HP Enterprise next week, the enterprise strategy seems to be in a constant state of disarray.
IBM has tried to make the transformation into a cloud company, putting all the pieces in place, but so far it has little to show for its cloud-focused strategy. Last week, it reported another lackluster earnings report punctuated by the 14th straight quarter of reduced revenues. You could say it will take time to make such a dramatic transition, but after 3.5 years, you have to wonder how long it will take for Big Blue to turn the corner.
While Oracle is seeing an increase in cloud revenue, which could reach $2 billion this year, an analysis in Forbes suggests that the company could simply be using sales tricks to shift revenue to the cloud without the real adoption the revenue numbers would suggest. Meanwhile a Business Insider report indicated that it could take years for Oracle to just break even on its cloud business.
Regardless, all of this data points to one thing. The haves, who came early to the cloud, are rolling in the dough, and Wall Street is rewarding them accordingly. Meanwhile, the have-nots, who were late to the game, are struggling, and Wall Street is being less kind.