Amazon Web Services reported impressive sales growth for the year last night, as Google Cloud came clean for the first time and admitted that it was substantially loss-making.
The performance of the two was reported as part of their parent companies' fourth quarter results, with the accompanying news that Amazon CEO Jeff Bezos (pictured) was kicking himself upstairs and being replaced by cloud chief Andy Jassy.
Fourth quarter results for Amazon show that Amazon Web Services sales grew 28% compared to the same quarter last year to $12.7bn. Operating income increased 41% to $3.5bn, delivering a margin of 27.9%.
AWS now accounts for 12% of Amazon group revenue, as well as the largest chunk of its profits. For the year as a whole, AWS sales leapt by more than $10bn (or +29.5%) to $45.37bn, producing an annual margin of 29.8%. By the third quarter of 2021, AWS CEO Jassy will replace Bezos as CEO of Amazon, who will instead become executive chairman to concentrate on his pet projects - like space and The Washington Post.
Meanwhile, Google Cloud parent Alphabet reported its fourth quarter and revealed that the cloud unit saw sales growth of of 46.6% to $3.8bn. For FY20 as a whole, Google Cloud revenue growth was slightly lower at 46.4%, producing total annual sales of $13bn. While AWS continued its profits growth, for FY20 Google Cloud generated losses of $5.6bn, with a $1.2bn loss in the fourth quarter.
Maybe this isn't totally surprising though, considering that Google is ploughing billions of dollars into building hyperscale data centres around the world to increase cloud capacity, to enable it to better compete against AWS and Microsoft Azure.
Google has also tripled its cloud direct sales force and has expanded its partner channel to improve market reach. Brian Klingbeil, chief strategy officer at hybrid IT services provider Ensono, is siding with Google.
Klingbeil said: “Between Google reporting its cloud business earnings for the first time and AWS' CEO taking over from Jeff Bezos, it's clear that cloud computing is becoming a larger focus for the big tech giants, signalling significant growth that is yet to come in the cloud industry.
“Google has been investing heavily to catch up to AWS and Azure, and the results they released today reflect that. One factor that is contributing to Google Cloud's hyper-growth is its prioritisation of verticalisation, which is a strategy that will set them up for success in 2021.” He said: “We think they are investing effectively, as we are seeing interest in GCP [Google Cloud Platform] building within the enterprise client base that we serve, so much so that we have added it to our managed services portfolio in 2021.”
