The cloud platform leaders: Amazon, Microsoft, Google and IBM reported earnings in the last ten days. The results were incredibly positive across the board with all companies reporting strong growth in their cloud platforms. From the stock perspective, the result were mixed: Microsoft and Google’s earning reports were incredibly well received and the stocks picked in after hour trading. IBM’s strong cloud numbers were shadowed by another revenue declined and the stock paid the consequences. Amazon Web Services(AWS) revenues were the shinning starting of the earnings report but the stock also traded down based on a decline in profits due to heavy investments in the retail business.
The diverse market reactions fo rthe different cloud platform incumbents raises an interesting question: what cloud platform has the most potential from Wall Street’s perspective. Amazon continues to be the undisputed leader in teh space but that doesn’t always translate into Wall Street love. Public market analysts need to evaluate a cloud platform not only from the technology and growth standpoint but also taking into consideration other factors such as the impact or dependencies on other business units [Amazon’s example], the revenue impact based on specific international markets or currency dependencies as well as other unexpected factors that can affect future growth.
With that in mind, I’ve put together a few ideas about the lead cloud platforms from a public market perspective that might help to illustrate some of these points. For each platform, I’ve tried to provide an analysis from a Wall Street perspective as well as stating key questions that should be consider and factors that can drastically change the perspective on the stock
Microsoft’s Azure consolidate its position as the number two cloud platform in the market. Azure reported an outstanding 116% year-on-year revenue growth. Microsoft’s Intelligent Cloud segment that includes Microsoft’s server products and Azure posted revenues of $6.4 billion. Overall, Microsoft’s investments in new areas such as artificial intelligence(AI) or internet of things(IOT) continues to make Azure one of the most exciting technologies in the market.
— Key Questions: Can Microsoft bridge the gap with Amazon? How would the acquisition of Linkedin affect Azure’s growth?
— X Growth Factors: Office 365 grew 51% year-on-year and its adoption continues to be an accelerator for the adoption of the Azure platform. Window’s and Surface’s adoption are also other factors that can influence the Azure growth.
AWS posted an impressive $3.2 billion in revenue for the quarter and an increasing profit. However, the stock was punished based on lower than expected margins in the retail sector. From a public market perspective, the main question about AWS is whether it can sustain or increase its lead over rivals such as Microsoft and Google that have been successful out innovating Amazon in emerging technology ares such as IOT, AI or virtual reality.
— Key Questions: Can Wall Street objectively delineate the dependencies between Amazon’s retail adn cloud businesses? If AWS gets big enough, should it become a standalone company?
— X Growth Factors: Devices such as Amazon Echo or the future drone delivery business can accelerate the adoption of AWS.
Alphabet doest not yet break down revenues of Google Cloud which makes the growth numbers subjected to speculation. However from a public market perspective, Google Cloud’s upside potential is the subject of exigent. Alphabet’s stock traded higher after earnings but the exigent was ,mostly related to better than expected growth in the ad business.
— Key Questions: What are the real numbers for Google Cloud? Can Google cloud become a leader in the AI field?
— X Growth Factors: There are many factors that can influence the growth of Google Cloud: G-Suite, Android, Pixel, Home are some of the technologies that can increase the adoption numbers for Google Cloud in the near future.
IBM also reported strong numbers for its cloud platform group which Bluemix and Softlayer. However, IBM’s stock was affected based on the decline in some of the traditional business units. The rapid growth of IBM Watson and its development cloud services in Bluemix are positive highlights for public market analysts. For IBM, the number one goal has to be to pass Google Cloud for the number three spot in the market and to close the gap with Microsoft Azure.
— Key Questions: How much longer will IBM’s transformation take? Can IOT and AI turn into big differentiators against Amazon, Google and Microsoft? Is IBM being valued correctly considering and investment and growth in the new areas compared to the traditional business?
— X Growth Factors: Watson is definitely the biggest factors that can influence the immediate growth of the IBM cloud platform.