Cloud Wars at the Right Price
July 23 2017 - 10:29AM
Dow Jones News
By Dan Gallagher
The cloud is an expensive business to operate in, so it helps
when the cloud seemingly sells itself.
The second quarter may turn out to be one of those times. Cloud
providers who have taken to sharp price cuts in the past seem to be
taking a summer break. A study by RBC Capital last week found that
Amazon.com's AWS and Microsoft's Azure, the two leaders in the
space, had "minimal effective price reductions" during the June
quarter, with "flat pricing" at Google, IBM and others.
The same analysts had reported notable price reductions from
both Microsoft and Google in the first quarter, when Microsoft
dropped its prices an average of 8%. But the lack of such action in
the June period didn't seem to hurt the company's cloud business.
In fact, Azure revenue surged 97% year over year in the June
quarter, after notching 93% growth in the March quarter.
The cloud still represents just a fraction of what businesses
expend on technology. Brent Bracelin of KeyBanc Capital estimates
that the largest cloud platforms combined accounted for only 5% of
total enterprise tech spending last year. Microsoft's rapid growth,
despite no significant price cuts, therefore bodes well for its
competitors that are posting their own quarterly results this
week.
Wall Street expects Amazon to report 41% year-over-year growth
for AWS revenue in the second quarter. Alphabet Inc., the parent
company of Google, doesn't break out results for its cloud service,
but the segment containing that business as well as Google's
content and device sales is expected to show 44% growth for the
period.
Given the billions these three companies spend every year
building out their networks, it is nice when they don't have to
always seed the cloud to make it rain.
Write to Dan Gallagher at dan.gallagher@wsj.com
(END) Dow Jones Newswires
July 23, 2017 11:14 ET (15:14 GMT)
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