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    Cloud Market Giants Battle for Supremacy: Who Will Prevail?

    The cloud market has become a significant engine of profit and revenue growth for major firms in the technological sector. In this article, three well known corporations: Amazon, Microsoft, and Alphabet (the parent company of Google), are examined in relation to their business strategies in the highly competitive cloud market.

    We also look at the difficulties that competitors like IBM, Alibaba Group, and Oracle are facing. Mott Capital Management LLC’s founder, Michael Kramer, offers his perspective on these occurrences.

    In a Nutshell

    • Amazon and Microsoft will rely on their cloud businesses more and more to boost their profit and revenue growth.
    • Alphabet wants to grow its relatively small cloud business into a key player in the cloud market that boosts the profitability of the firm as a whole.
    • The cloud computing market is very competitive, with well known companies like IBM, Alibaba Group, and Oracle vying with Alphabet, Amazon, and Microsoft for market share.


    Amazon’s cloud business is the second largest in the industry, behind Microsoft, the undisputed leader. But Amazon is far more dependent on the cloud for its corporate growth. The cloud accounted for nearly 60% of Amazon’s total operating revenue of $12.4 billion in 2018, despite sales accounting for only 11% of the company’s total revenue. AWS earned operating income of $7.3 billion in 2018, about 60% more than the $4.3 billion it generated in 2017.

    The cloud market is fiercely competitive, with major players like IBM, Alibaba, and Oracle vying for market share against the tech giants.

    Michael Kramer

    In addition, operating margins grew nearly 400 basis points to 28.4%. This highlights how tight Amazon’s margins are in its core e-commerce business. Amazon’s non cloud businesses had operating income of just $5.1 billion, and an operating margin of just 2.4%. This suggests that Amazon’s future corporate profit growth depends heavily on the expansion of its AWS business. If AWS falters, Amazon would have to quickly find a new growth engine to drive corporate profits.


    Microsoft’s cloud growth has been impressive, but the business is part of a more balanced portfolio of businesses compared to Amazon. In its fiscal year 2018 that ended in June, cloud accounted for 30% of Microsoft’s total $110.3 billion in sales. During 2018, the cloud unit had total operating revenue of $11.5 billion, which accounted for only 32.8% of its total operating revenue.

    The unit’s operating margins were 35.7%, up about 200 basis points from the previous year. Microsoft’s other two units. Productivity and Business Processes, and More Personal Computing accounted for 32% and 38%, respectively.


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    The lower percentage of operating income may give Microsoft the ability to be more patient with its approach to growing its cloud business. However, Microsoft will need to continue to grow cloud sales to keep overall revenue from stagnating or slowing too much.


    What is clear for Alphabet is that the cloud is not a major contributor to its business and is not likely to be any time soon, although the company has big plans for expansion. It is unclear how much revenue Alphabet makes per year from its cloud business, but it is possible to gauge how well the unit is doing based on what little information the company has disclosed.

    Using the conference call comment that the cloud generates $1 billion per quarter, I would suggest that the cloud accounted for nearly 20% of Google’s “other revenue” of $4.7 billion in Q4 2017. Regardless of the exact size, it would suggest that the business now generates approximately $5 billion per year, which represents less than 5% of Alphabet’s total annual revenue. However, Alphabet wants to accelerate this revenue growth, and soon.

    In 2019, the company hired Thomas Kurian from Oracle Corp (ORCL), who used to run Oracle’s cloud business. The company also noted on its fourth quarter conference call that it hired approximately 4,400 new employees in the quarter, with the largest additions being in cloud sales and technical teams.

    The Future of the Cloud Market

    Based on an analysis of these three companies, it is clear that both Amazon and Microsoft will increasingly rely on their cloud businesses to accelerate profit and revenue growth. Alphabet, meanwhile, will strive to make its relatively small cloud business a critical player in the industry and a major contributor to company profits.

    All three will have to do so in the face of significant competition in the cloud market, as there are other players in the sector such as IBM Corp. (IBM), Alibaba Group Holdings Ltd. (BABA), and even other companies in the cloud industry. (BABA), and even Oracle, who would love to take a big bite out of the market share of any of these three companies.Michael Kramer is the founder of Mott Capital Management LLC, a registered investment advisor, and the manager of the firm’s actively managed long term thematic growth portfolio.

    Kramer typically buys and holds securities for a period of three to five years. The information presented is for educational purposes only and is not intended as an offer or solicitation to sell or buy specific securities, investments or investment strategies. Investments involve risk and, unless otherwise indicated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy set forth herein. Upon request, the advisor will provide a list of all recommendations made during the past 12 months. Past performance is not indicative of future performance.

    Wrap Up

    The increased demand for scalable and effective IT services has turned the cloud market into a battlefield for tech titans. The cloud market leaders are Amazon, Microsoft, and Alphabet, each of which has carefully positioned its cloud business to spur profit and sales development.

    As industry leaders in the cloud market, Amazon and Microsoft will likely continue to rely on their cloud offerings to fuel their financial success. Both businesses have seen tremendous growth in their cloud offerings, and they both likely will use their current client bases and infrastructure to maintain their competitive advantage.

    Despite having a far smaller cloud company than Amazon and Microsoft, Alphabet is keen to become a major participant in the industry. Alphabet wants to boost the contribution of its cloud division to overall profitability by using its technology expertise and business segment synergies.

    The path to cloudmarket industry dominance is not without obstacles, though. Oracle, IBM, and Alibaba Group are competitors competing for a piece of the action. These businesses have significant resources and are actively working on tactics to challenge Amazon, Microsoft, and Alphabet’s hegemony.

    Investors with an interest in the cloud market should exercise prudence and be aware of the risks and unknowns that come with this competitive business. When choosing an investment, it is essential to conduct extensive research, speak with financial consultants, and diversify.

    In conclusion, the cloud market is positioned for long term expansion and change. The cloud will continue to be an essential component for businesses all around the world as technology develops further. Amazon, Microsoft, and Alphabet are establishing leadership positions despite strong competition. Investors seeking long term prospects in the cloud industry must grasp the complexities of this industry.


    How Important is the Cloud Business to Amazon, Microsoft and Alphabet?
    Cloud Market Giants Battle for Supremacy: Who Will Prevail?

    The cloud business has grown to be a crucial part of all three businesses, fueling their expansion and significantly boosting their total profitability. Reliance on cloud services is anticipated to grow as technology progresses.

    Which Companies Pose a Significant Threat to Amazon, Microsoft and Alphabet in the Cloud Sector?

    In the cloud market, Oracle, IBM, and Alibaba Group are fierce rivals. These businesses are working hard to increase their market share and compete with Amazon, Microsoft, and Alphabet for supremacy in this industry.

    Should Investors Consider These Cloud Giants as Long Term Investments?

    A careful analysis is necessary for any investment decision. Although the cloud businesses of Amazon, Microsoft, and Alphabet have demonstrated significant growth potential, it is imperative to speak with a licensed financial advisor or tax expert before making any investment decisions.

    Are There any Risks Associated with Investing in the Cloud Sector?

    Investments usually include some risk, and the cloud market is no exception. To reduce potential dangers, it’s critical to conduct in depth research, examine market patterns, and diversify your financial holdings.

    Article Sources for Cloud Market

    At Capital Maniacs, we are committed to providing accurate and reliable information on a wide range of financial topics. In order to achieve this, we rely on the use of primary sources and corroborated secondary sources to support the content of our articles.

    Primary sources, such as financial statements and government reports, provide firsthand evidence of financial events and trends. By using primary sources, we are able to directly reference information provided by the organizations and individuals involved in these events.

    Secondary sources, such as financial analysis and commentary, interpret and analyze primary sources. While these sources can be useful for providing context and background information, it is important to use corroborated sources in order to ensure the accuracy and reliability of the information we present.

    We take pride in properly citing all of our sources, both primary and secondary, in order to give credit to the original authors and to allow our readers to verify the information for themselves. We appreciate your trust in our website and are committed to upholding the highest standards of financial journalism.

    1. Microsoft | Cloud Market – Earnings Release FY18 Q4
    2. Securities and Exchange Commission – Announces Fourth Quarter Sales Up 20% To $72.4 Billion
    3. Microsoft | Cloud Market – Earnings Release FY19 Q4
    4. Alphabet | Cloud Market – Alphabet Q4 2018 Earnings Call

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