Q2 Cloud Shakeup: AWS Losing Ground to Microsoft, Google, Oracle

While AWS posted strong Q2 numbers that would look great in a vacuum, in the harsh reality of the Cloud Wars, the AWS results look tepid when stacked up against the outstanding performances from Microsoft, Google Cloud, and Oracle.

Before showing the comparative results, I’ll share three enormously important observations about what those results mean for not only the four hyperscalers but more importantly for business leaders looking to identify the hot horses to ride with in the absolutely wild AI Revolution:

1. While AWS should be rightfully proud of the progress it’s making with its AI business, that performance pales in comparison to what Microsoft, Google Cloud, and Oracle are experiencing — and the latest round of financial results make that point unmistakably clear.
2. While AWS now has an annualized run rate of $124 billion, it is losing share in the overall cloud and AI markets to Microsoft, Google Cloud, and Oracle because all of those companies are growing much more rapidly than AWS is. And to all those who’ll howl at that point and say, “But Google Cloud and Oracle are tiny compared to AWS!,” my reply is, “Yes, that’s true — but on the other hand, Microsoft’s cloud business is now a stunning 50% larger than AWS’s — so the size differential cuts both ways.” So the more-important takeaway is that the cloud-revenue growth rates for the other three increased very significantly from Q1 to Q2 — Microsoft 20% to 27%, Google Cloud 28% to 32%, and Oracle 23% to 27% — while AWS reported only a slight increase of 17% to 17.5%.
3. On behalf of AWS, I will once more file an entry in the “Life Is Not Always Fair” journal. In any other industry at any other time in business history, AWS’s Q2 results would be hailed as fantastic, with a company at the scale of $30.9 billion in quarterly revenue growing at the heady rate of 17.5% while turning a massive profit. However, we’re not in some alternative reality — rather, we are here in the thick of the greatest growth market the world has ever known and AWS, for all of its achievements in Q2, is losing share to the other hyperscalers because each of them is growing more rapidly as the AI Revolution swings into high gear.

HYPERSCALER HEAD-TO-HEAD COMPETITION IN Q2

Cloud Provider	Cloud Revenue	Growth Rate	Acceleration (Q1 → Q2)	Incremental Revenue
Microsoft	$46.7B	27%	20% → 27%	$4.3B
AWS	$30.9B	17.5%	17% → 17.5%	$1.6B
Google Cloud	$13.6B	32%	28% → 32%	$1.3B
Oracle	$6.7B	27%	23% → 27%	$500M

Here’s another way to look at who’s hot and who’s not: setting aside for a moment the stupendous calendar-Q2 delivered by Microsoft (its fiscal Q4), which I have called The Greatest Quarter of All Time, look at the relative results for AWS and Google Cloud. In total Q2 cloud revenue, AWS is a little more than 2X larger than Google Cloud: AWS Q2 revenue was $30.9 billion versus $13.6 billion for Google Cloud. So, when we look at how well each company did in adding incremental revenue in Q2 versus Q1, we might expect that since AWS is twice as big, it probably generated twice as much incremental new revenue as did Google Cloud.

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But that’s clearly not the case: AWS added $1.6 billion in new revenue while Google Cloud came pretty close to matching that with $1.3 billion in new revenue. And that means Google Cloud is grabbing a disproportionately large chunk of incremental new revenue, while AWS is doing the opposite. Look at these comparisons of overall Q2 revenue share among the four hyperscalers versus new incremental-revenue share:

Cloud Provider	Q2 Revenue Share	Q2 vs Q1 Incremental Rev. Share
Microsoft	47.7% ($46.7B)	55.8% ($4.3B out of $7.7B)
AWS	31.6% ($30.9B)	20.8% ($1.6B out of $7.7B)
Google Cloud	13.9% ($13.6B)	16.9% ($1.3B out of $7.7B)
Oracle	6.8% ($6.7B)	6.5% ($0.5B out of $7.7B)

The AI Impact

It is astonishing to see companies the size of the four hyperscalers reporting accelerating growth in Q2 (for the record, Oracle’s most recent quarter ended May 31, which was its fiscal Q4, while the quarter for the other three ended June 30). And while AI was not the one and only reason behind that anomalous acceleration, it certainly was the biggest factor.

Did AWS get a Q2 boost from AI? I think there’s no question about that, and AWS is building a very solid AI business around Bedrock. But, Cloud Wars is a contact sport, often heavy contact, and the numbers here show again that Microsoft, Google Cloud, and Oracle all saw much bigger boosts, which can be taken as a clear indication that customers are buying into the AI strategies of those three hyperscalers at a faster and more-committed clip than they are to that of AWS.

The Myth of What’s ‘Really’ Cloud and What Isn’t

Some observers try to undercut Microsoft’s explosive cloud business by saying something along the lines of, “Yes, $46.7 billion in a single quarter is a huge number, but a lot of that is just cloud versions of Word and Powerpoint and Teams, so it’s really not ‘cloud.’ ” And some AWS apologists will chime in by saying, “The only REAL cloud is infrastructure, so AWS is still #1.”

Well, that’s a lot of — to be polite — nonsense. In the very early days of the cloud, the vendors set the terms of the relationships with customers, and the vendors picked the definitions and set the priorities and framed the discussion and debate of what is or isn’t cloud and is or isn’t “real” cloud.

But those goofy days are over — and good riddance! — and it is now customers that are setting the terms of the debate, and they are demonstrating with their wallets to the tune of $500 million every single day, seven days a week, that Microsoft is the preferred provider.

Now, having said that, I also believe and have reflected in my Cloud Wars Top 10 rankings that Google Cloud and Oracle have been doing a better job than AWS for some time in helping customers transform their businesses with cloud and AI. That’s why Microsoft is #1, Google Cloud #2, Oracle #3, and AWS #4: because the true power in the Cloud Wars is held by those who shape the future and help customers build their own futures rather than just perfecting their pasts.

Nobody owns the #1 spot in any market or any competitive endeavor, and that’s certainly true in the Cloud Wars — instead, it’s a constant battle to see which company is doing the best job at helping customers overcome the challenges of today so they can thrive in the future.

And if Google Cloud and Oracle continue to be the most potent disruptors of the past and creators of the future, then they each have a very good chance to do to Microsoft what they’ve already done to AWS: leapfrog it regardless of its vastly superior size.

Because, again, they is about building the future, not riding on the past.

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