Microsoft RPO Boom: → 34% to $315B

Welcome to the Cloud Wars Minute — your daily cloud news and commentary show. Each episode provides insights and perspectives around the “reimagination machine” that is the cloud.

In today’s Cloud Wars Minute, I break down Microsoft’s massive Q3 cloud gains.

Highlights

00:14 — Microsoft has been in the news: “There’s a data center overcapacity. The demand for AI services is cratering.” Any questions about whether or not that was nuts were put to bed late last week, when it reported that RPO (remaining performance obligation) was up 34%. That RPO now totals $315 billion of business. That’s future demand.

01:12 — A staggering number. Also, for its fiscal Q3 ended March 31, Azure grew 33%, higher than expected. Total cloud growth was up 20% to $42.4 billion. And just for perspective, that $42.4 billion is about the same as the combined revenue of AWS and Google Cloud for the same period. Demand is strong. Data center buildouts are going full steam.

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02:38 — Across all the hyperscalers (Oracle, AWS, Google Cloud, Microsoft), they are saying they’re investing, this calendar year, $350 billion. And in spite of that level of investment, they are still all capacity-constrained. Listening to the folks at Microsoft and others, there are really five big challenges coming out of this.

03:17 — First, you’ve got to be able to pony up about $80 billion. Second, the new ingredients of what goes into those data centers are constantly changing. You’ve also got to keep pace as customers shift their requirements. Then: Where do I get the power? How do I get the other utilities? Last, how do you predict demand in what is, in today’s world, an increasingly unpredictable environment?

04:33 — Now, I’m not saying this to try to give cover to Microsoft or any other hyperscalers. They sure don’t need it, particularly from me. But my point is that in these crazy days, we have to be careful to whom we listen to and what they’re saying. It’s easy to always say “the sky is falling,” that someone is pulling back. But that’s nonsense.

05:20 — It’s like these naysayers see that AWS and Microsoft have tinkered a little with where their future data centers are going to be and that means the market is cratering. It’s like a football team says, “I’m going to trade a wide receiver,” and these folks interpret that as, “We’re never going to pass the ball again. We’ll just keep it on the ground.” That’s extrapolating in a crazy way.

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