Yuvraj Malik
(Reuters) – Wall Street’s three biggest technology companies have reported stronger-than-expected sales from their cloud computing units in recent days as interest in artificial intelligence drives up spending by corporate clients.
The growth of the $270 billion cloud infrastructure market, the source of cash for Amazon.com (NASDAQ:), Microsoft (NASDAQ:) and Alphabet (NASDAQ:), provides a clear sign that investments in artificial intelligence are paying off after how investors increased the value of these shares. record highs thanks to optimism about new technologies.
Many large customers have begun spending money on cloud computing again after pausing last year to cut costs, executives and analysts said.
Amazon, the last of the trio to report on Tuesday, said its cloud computing unit AWS grew 17% in the January-March period, beating Wall Street’s growth estimate of 15%, and reached $100 billion in annual sales for the first time. . .
Microsoft Azure and Google Cloud performance was solid, growing above expectations by 31% and 28%, respectively, in the first three months of the year.
“Looking at AWS, Microsoft Azure and Google Cloud, it’s clear that two things are happening at once: AI is driving growth, but other cloud spending is rising,” said DA Davidson & Co analyst Gil Luria.
Cloud infrastructure providers have seen growth rates of up to 60% for several years, with demand skyrocketing during the COVID-19 pandemic as more businesses moved online. However, companies have been forced to reset their expectations in the past year as customers cut spending in an increasingly challenging business environment.
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The industry is at the forefront of artificial intelligence adoption, and customers have begun buying new features quickly, executives said.
“The number of Azure AI customers continues to grow, and average spend continues to increase,” Microsoft CEO Satya Nadella said during the company’s earnings call, adding that more than 65% of Fortune 500 companies are Azure OpenAI Service customers.
AI services contributed 7 percentage points to Azure’s growth, up from 6 percentage points in the October-December quarter.
More than 60% of funded generative AI startups and nearly 90% of genAI unicorns used Google Cloud, Alphabet CEO Sundar Pichai said during his company’s conference call last week.
“There is an inevitable and ongoing migration of workloads to the cloud and consolidation of IT spending towards large platforms, including hyperscalers,” said RBC Capital Markets analyst Rishi Jaluria.
Hyperscalers are cloud providers with a large network of data centers and a wide range of services that are often preferred for end-to-end workload support.