Cloud costs a lot of money


As the old adage goes, you’ve got to spend money to make money. With regard to public cloud success, this certainly feels true. Google, Microsoft, and AWS all reported earnings recently, and each announced significant spending on data centers and more (capital expenditures), while also announcing significant growth in cloud revenue. Meanwhile, cloud vendors like Oracle that weren’t able (or willing) to invest as heavily continue to lag in cloud market share and growth.

Although it may be too strong to suggest that big spending is a causal factor in netting big returns, it’s perhaps telling that AWS spent much more than its cloud peers and saw revenue growth jump 10% over the last year. Causation? Maybe. Correlation? Definitely.

So, how much did the Big 3 cloud vendors spend?

Spending big

Charles Fitzgerald, managing director of Platformonomics, has done the math so you don’t have to. Though the cloud vendors don’t break out capex devoted exclusively to their infrastructure-as-a-service or software-as-a-service offerings, they do break out capex overall. Microsoft’s capex is probably cleanest (it has search spending but a bigger percentage arguably goes to Azure data centers. Amazon has huge capex to support its retail business, and Google/Alphabet spends a lot on YouTube and search). But even a small percentage of the hyperscalers’ capex spending for cloud is bonkers big.

cloud quarterly capex Charles Fitzgerald

Other clouds aren’t included here, in large part because they’re not even roughly comparable in terms of capex spending. Earlier this year Fitzgerald, commenting on Oracle’s capex investments, noted that Oracle’s “annual spend [$1.85 billion] is about what Amazon spent in a week on capex in the last quarter of 2020.”

Looking at the different clouds’ cumulative investments over time, it’s clear that there’s a long way to go for anyone to catch up with the hyperscalers.

Copyright © 2021 IDG Communications, Inc.





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