Tech giants fuel cloud computing boom with AI advancements

Cloud computing boom: Recent reports from three major players on Wall Street indicate a surge in sales within their cloud computing divisions, attributed largely to the growing interest in artificial intelligence (AI) among corporate clients.

Amazon.com, Microsoft, and Alphabet have all exceeded sales expectations in their respective cloud computing sectors, highlighting the substantial growth in the $270 billion cloud infrastructure market. The market has long been a major revenue source for these companies, notably Amazon.com, Microsoft, and Alphabet, whose stocks have reached record highs due to optimism surrounding AI technology.

Corporate customers, after scaling back spending last year to mitigate costs, are now reinvesting in cloud computing services. Amazon, in particular, announced that its cloud computing arm, AWS, experienced a 17 per cent growth in the first quarter, surpassing Wall Street's forecast of 15 per cent and achieving a milestone of $100 billion in annual revenue.

Similarly, Microsoft's Azure and Google Cloud reported growth rates above expectations, at 31 per cent and 28 per cent, respectively, during the same period.

Analysts observe that AI is playing a pivotal role in driving this growth, alongside accelerated spending across other cloud services. According to Gil Luria, an analyst at DA Davidson & Co, the simultaneous growth in AI adoption and overall cloud spending is evident across AWS, Microsoft Azure, and Google Cloud.

Despite the challenging business environment posed by the COVID-19 pandemic, the cloud infrastructure industry has remained resilient. Companies have increasingly turned to AI solutions, contributing to a steady increase in demand for cloud services.

Microsoft CEO Satya Nadella highlighted the growing adoption of Azure AI services, with over 65 per cent of Fortune 500 companies now using Azure OpenAI Service. AI services contributed significantly to Azure's growth, with a 7 percentage-point increase in the first quarter.

Google Cloud has also seen substantial adoption, with more than 60 per cent of funded generative AI startups and nearly 90 per cent of genAI unicorns using its services, according to Alphabet CEO Sundar Pichai.

Analysts predict a continued migration of workloads to the cloud, with the consolidation of IT spending towards major cloud platforms, known as hyperscalers. These providers, characterised by extensive data centre networks and comprehensive service offerings, are increasingly favoured by businesses seeking end-to-end workload support.

(With Reuters inputs)