Amazon, Microsoft and Google Lead the Cloud: Should Investors Buy These Tech Giants’ Stocks?

August 23, 2023

In today’s rapidly-evolving technological landscape, the cloud computing industry has emerged as a beacon of innovation and growth.

As data becomes the new oil, businesses globally are soaring to new heights in the cloud, seeking robust, scalable, and secure infrastructure.

In the midst of this digital migration, three giants – Inc (NASDAQ: AMZN), Microsoft Corporation (NASDAQ: MSFT) and Alphabet Inc (NASDAQ: GOOG) – have dominated market share in the vast cloud.

Based on the latest Q2 2023 earnings, it is essential to assess the strides and strategies of these behemoths, understanding what makes them the linchpins of this vast digital ecosystem.

Join me as I take a look at some of their performance metrics, growth narratives, and strategic investments – painting a comprehensive picture of the current cloud competition.

1. Amazon Web Services (AWS): The established leader

Amazon’s AWS is the established leader in the cloud space, benefitting from the first mover advantage as it was launched back in 2006.

This has allowed AWS to establish a strong brand presence and expand its suite of services, from computing power and storage options to networking capabilities.

Here are some key highlights that make Amazon an interesting investment for investors.

Dominant market share: AWS consistently occupies the number one spot in the cloud infrastructure services space, with a 32% market share in Q2 2023.

Steady growth: Even as a mature player, AWS displayed a commendable 12% year-on-year (YoY) increase in sales.

Investment in AI: Amazon’s strategic emphasis on expanding AI capabilities is evident from its recent US$100 million investment in a new generative AI programme.

This signifies AWS’s efforts to innovate and offer leading-edge solutions, ensuring its sustained relevance in the competitive market.

2. Microsoft Azure: The fast-growing challenger

Microsoft’s longstanding reputation with enterprise solutions (like Windows, Office Suite) gave Azure an advantage when pitching to businesses.

Since its inception in 2010, Azure has aggressively expanded its services, often integrating seamlessly with Microsoft’s other enterprise products.

Here are some key reasons why Microsoft is growing to be a strong challenger to Amazon’s AWS.

Strong market presence: Azure sits comfortably as the second-largest player, having captured 22% of the market.

Impressive growth: Azure’s annual growth rate of 26% surpasses its competitors, illustrating its burgeoning presence and popularity.

Promising order backlog: A 19% increase, amounting to a whopping US$224 billion, in its cloud order backlog hints at Azure’s strong future revenue potential.

Strategic collaborations: Azure’s partnerships with major companies like Ikea, Volvo Group, and Zurich Insurance, through its OpenAI Service, underscore its position as a preferred solution for big enterprises.

3. Alphabet’s Google Cloud: The dark horse

Alphabet is Google’s parent company and has launched Google Cloud to challenge both Amazon and Microsoft.

However, since Google Cloud is a relatively new player as compared to AWS and Azure, there is a lot of catching up to do, but this also allowed Alphabet to innovate differently.

Google’s well-known reputation in the tech industry also gives them an edge, and here are three key factors that make Alphabet an interesting choice.

Remarkable growth: Despite being third in the race, Google Cloud showcased the most impressive YoY growth in sales among the top three, at 31%.

Profitability focus: By extending the depreciation period for servers and network equipment, Google Cloud displays a sharp focus on financial prudence and profitability.

Preferred choice for AI startups: Over 70% of emerging AI-focused startups, including major names like Cohere, Jasper, and Typeface, rely on Google Cloud.

This not only validates Google Cloud’s superior AI capabilities but also positions it as a potential leader in the AI cloud space.

Compelling investment opportunity for the three cloud giants

All three cloud giants – AWS, Azure, and Google Cloud – present a compelling investment opportunity.

Each of them has carved a distinct niche, with AWS as the consistent leader, Azure as the fast-growing challenger, and Google Cloud as the emerging favourite for tech startups.

Investors looking to tap into the booming cloud industry will find Amazon, Microsoft, and Alphabet to be interesting stocks to add to their portfolios.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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