Key Takeaways

1. In Q1 2023, Cloud Providers saw slower growth attributed to economic challenges and pricing pressure. The aggregate growth rate of the four players was 18.7 percent, significantly lower than the 32.7 percent YoY growth witnessed in Q1 2022.
2. The collective combined cloud revenue for the four players surged from US$46.1 billion to US$54.7 billion.
3. Cloud revenue constituted an average of 20.8 percent of the total revenues for the four players signifying the growing importance of this business to the overall portfolio.
4. Google Cloud Platform (GCP) achieved its first-ever profitable quarter. It intensified customer-focused initiatives and introduced new licensing options called flex agreements allowing customers to migrate to the cloud with no upfront commitments.
5. AWS, a primary category creator in the cloud market, contends with pricing pressure and the challenge of price-sensitive customers, impacting its growth.
6. The growth rate for AWS in Q1 2023 exhibited a notable deceleration, marking a contrast to the 36 percent growth observed in Q1 2022.
7. Microsoft Intelligent Cloud (MIC) reported a YoY growth of 15.9 percent driven by increased revenue from server products, cloud services, and enterprise services.
8. Oracle Cloud experienced remarkable YoY growth of 46.4 percent in Q1 2023 by leveraging its robust software cloud capabilities.
9. APAC region is emerging as a new battleground for cloud service providers, with companies starting operations in new markets such as Japan, Thailand, India, New Zealand, and Australia.

Assumptions

• The data collected from the company websites and financial reports of the four cloud service providers is accurate and reliable.
• The performance of the cloud service providers in Q1 2023 is indicative of their overall performance and can be used to predict future trends in the market.
• The report covers the first quarter of 2023 for each of the four cloud service providers. Notably, Oracle’s fiscal year concludes in May. To align their reporting cycle with the calendar year, Q3 FY2023 is considered equivalent to Q1 CY2023.
• Revenue figures for the previous quarter may not align precisely with the corresponding figures in the previous quarterly report, primarily due to the focus on Microsoft Intelligent Cloud (MIC), which encompasses Azure and other associated services.
• In our analysis, we have focused on the Google Cloud Platform (GCP), which is a part of Google’s overall revenue reported under Google Cloud. Google Cloud encompasses Google Workspace, GCP, data and analytics platforms, infrastructure, collaboration tools, and other enterprise cloud services. It is worth noting that Google does not report GCP’s revenue separately, but rather as part of the overall Google Cloud segment.

Exhibit 1
Revenue growth rate of cloud service providers,
(Q1 2022-Q1 2023)

Exhibit 2
Key financial metrics of cloud service providers,
(Q1 2022- Q1 2023)

Google Cloud Platform

Overview

1. GCP’s focused strategy and enhanced capabilities has positioned it as one of the leading players in the cloud market. In Q1 2023, GCP achieved a significant milestone by reporting its first-ever profitable quarter, with a revenue of US$7.4 billion, representing a YoY growth of 27.5 percent.
2. Google adopts an aggressive approach, offering free credits, aggressive discounts, and price flexibility. GCP introduced flex agreements, enabling customers to establish relationships without upfront commitments. Additionally, GCP extended free trial periods, providing ample time for potential customers to explore its services.
3. Google Cloud’s strength lies in its expertise in multi-cloud management, open-source foundation, and engineering culture. Despite entering the market later, GCP offers industry-specific solutions, particularly in healthcare, showcasing its commitment to tailored solutions that meet diverse customer needs.
4. Google has identified four key priority areas for them to expand the cloud business:
   

Regional Presence

1. Expand global presence targeting the Middle East, Africa, and Asia-Pacific.
2. Operates 37 regions globally, with plans to introduce 14 additional regions. New regions include Germany, Saudi Arabia, Mexico, Malaysia, Thailand, New Zealand, Greece, Norway, South Africa, Austria, and Sweden.
3. Strengthening its presence in the Middle East with two availability regions in Tel Aviv and Doha, meeting the increasing cloud demands of Qatar’s government and enterprises.
4. Focus on the Asia-Pacific region by strategically targeting the high growth markets such as Malaysia, Thailand, and New Zealand.

Exhibit 3
Google Cloud Regions

Product Announcements

• Google Cloud Security AI Workbench: A specialized platform with advanced security intelligence to address top security challenges.
• In January 2023, Google Cloud launched four innovative AI technologies to revolutionize retailers’ in-store shelf-checking processes and elevate their e-commerce platforms.
• Google Cloud has announced the release of three new telecom products:
  1. Telecom Automation: Automate 5G network deployment, operation and management tasks, such as configuration, provisioning, and monitoring.
  2. Telecom Data Fabric: Data management and analytics platform that allows unifying data from multiple sources and applications across multiple clouds and data lakes.
  3. Telecom Subscriber Insights: Predictive analytics and insights into subscriber behaviour and network performance.
• Additionally, it is providing CSPs with the ability to deploy cloud-native networks in a hybrid cloud environment by enhancing Google Distributed Edge cloud infrastructure. The upgrade allows Google Cloud’s infrastructure to extend to the far edge of radio access networks and 5G core networks, enabling greater reach and flexibility.

Partnerships

AWS

Overview

1. Amazon Web Services (AWS) has solidified its position as a dominant player in the cloud computing market.
2. In Q1 2023, AWS generated US$21.4 billion in revenue, with a notable YoY increase of approximately 15 percent. However, this growth rate decelerated compared to the 36 percent growth witnessed in Q1 2022.
3. AWS contributes nearly 17 percent to Amazon’s overall revenue, showcasing its significant contribution to the group’s overall revenue.
4. Pricing pressure from competitors and price-sensitive customers is posing challenges for AWS, thus impacting its growth.

Regional Presence

1. AWS has expanded its global infrastructure with 99 availability zones across 31 regions and plans to add 5 new regions and 15 availability zones.
2. Launched local zones in Delhi and Kolkata, with plans for two more in Chennai and Bangalore by the end of 2023.
3. AWS Backup solution is available in Asia Pacific (Hyderabad), Europe (Spain), and Europe (Zurich) for scalable backup.
4. AWS Mainframe Modernization service expanded to regions including US East (Ohio), US West (N. California), and Asia Pacific (Seoul).
5. In January 2023, AWS launched its second infrastructure site in Melbourne.
   
   

Exhibit 4
AWS Cloud Regions

Product Announcements

1. In February 2023, AWS announced the general availability of AWS Telco Network Builder, a managed service that helps customers deploy, run, and scale telco networks on AWS.
2. Amazon Elastic Compute Cloud (Amazon EC2) is a cloud-computing platform that allows users to rent virtual computers, called instances, on which users can run their own applications.
3. Bedrock is a new service that allows AWS customers to tap into AI models from a variety of different providers via an API.
4. AWS VPC Lattice: An application networking service that simplifies connecting, securing, and monitoring service-to-service communication.
5. AWS Supply Chain: Cloud application that unifies data and provides machine learning (ML)–powered actionable insights.

Partnerships

Microsoft Cloud

Overview

1. MIC had strong growth in Q1 2023, reporting US$22.0 billion in revenue and a YoY growth rate of 15.9 percent, driven by the growth in server products, cloud services and enterprise services revenue.
2. With a QoQ growth rate of 2.6 percent, MIC is well-positioned to further strengthen its position in the cloud services market.
3. In May 2023, launched a suite of AI solutions and enhancements to its Cloud for non-profit, enabling fundraisers to interact with donors, manage campaigns and optimize operations.

Regional Presence

1. MIC has presence across 60+ regions and 140 countries globally.
2. In April 2023, it launched its first data centre in Poland, bringing new opportunities to develop the digital economy in the region.
3. It has revealed plans of expansion into new regions in China and aims to build a data centre region in Finland, with a focus on sustainable digital transformation and carbon-free district heating.
4. Microsoft has announced plans of expanding data centres in geographies such as the United States, Belgium, Brazil, Canada, Chile, Mexico, Cloud Government, Asia Pacific, Australia, China, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Taiwan, Austria, Denmark, Europe, Finland, France, Germany, Greece, Italy, Norway, Poland, Spain, Sweden, Switzerland, United Kingdom, Africa, Israel, Qatar, and the United Arab Emirates.
   
   Exhibit 5
   Microsoft Cloud Regions

Product Announcements

• Microsoft made Cloud OpenAI Service available to the public, aiming to democratize AI.
• At MWC 2023, unveiled 12 major product announcements and showcased over 20 demonstrations.
• GPT -4 AI model is available in preview on Azure OpenAI Service, combining OpenAI’s advanced model with Azure’s AI infrastructure and compliance controls.
• Launched the preview of serverless for Hyperscale in Cloud SQL Database, a managed relational database, offering various configurations based on purchase, deployment, service tier, compute, and hardware.

Partnerships

Oracle Cloud

Overview

1. Oracle Cloud achieved impressive YoY growth of 46.4 percent in Q1 2023, surpassing its growth of 33.3 percent in Q1 2022, indicating strong momentum in cloud offerings.
2. Oracle’s strategic entry into the cloud market allowed them to learn from other vendors experience and tailor their offerings to meet customer needs, resulting in faster growth.
3. In April 2023, Oracle announced enhanced capabilities for easier migration to OCI, increased workload security, and improved content distribution.
4. Oracle’s 2023 strategy focuses on key areas of infrastructure technology to stay ahead in the cloud services market:
   1. Prioritize solutions for multi-cloud, hybrid cloud, and edge computing with unified management, automation, and monitoring tools for improved performance and simplified operations.
   2. Evolve platform architectures beyond x86-64 to include Arm, reducing energy costs and improving hardware performance.
   3. Focus on essential technologies and services with simplicity and low cost to drive adoption.
   4. Prioritize control with defined standards and requirements for feedback, audit, security, and integration in infrastructure automation.
   5. Leverage AI for IT security to identify and respond to threats faster while reducing costs.
      

Regional Presence

1. Oracle Cloud provides over 100 cloud services available across 41 public cloud regions in 22 countries, providing a platform for efficient application hosting.
2. In May 2023, it launched its first cloud region in Southeast Europe, catering to the cloud computing needs of organizations in Serbia.
3. Demonstrating commitment to Southeast Asia, Oracle Cloud introduced a second cloud region in Singapore, delivering enhanced capabilities and performance.
4. Oracle opened a new public cloud region in Riyadh in Feb 2023 and expanded its existing region in Jeddah, strengthening its position in cloud services.
   
   Exhibit 6
   Oracle Cloud Regions

Product Announcement

• Introduced a new feature called Confidential Computing, which encrypts data while it’s being processed for added security. This feature is available in certain regions of the Oracle Cloud Infrastructure.
• Oracle Database 23c Free – Developer Release is a new version of Oracle’s database software that developers can use for free. It has new features that make it easier to work with modern data types, analytics, and development techniques.
• Launched a suite of cloud services called Oracle Banking Cloud Services for banks. The six new services include demand deposit account processing, limits and collateral management, global payment processing, API management, retail onboarding and originations, and self-service digital experience capabilities.

Partnerships