Microsoft and Google, experiencing a recent slowdown in cloud revenue, have witnessed a resurgence in growth attributed to the widespread adoption of generative AI (genAI). Both companies revealed their revenue numbers for Q4 2023, with Google Cloud contributing 10% to Alphabet’s revenue, marking a departure from years of quarterly losses. Microsoft Cloud, encompassing Azure and SaaS offerings, recorded a significant boost, surpassing $33 billion in revenue, a 24% increase. This surge is attributed to the integration of AI throughout Microsoft’s technology stack, attracting new customers and enhancing productivity.
In the reported quarter, Google’s cloud revenue reached $9.19 billion, a 28% year-over-year increase. Microsoft CEO Satya Nadella emphasized the impact of infusing AI across their tech stack and highlighted the company’s 53,000 Azure AI customers, one-third of whom subscribed in the last 12 months. Microsoft’s Azure business has seen growth, partly fueled by partnerships, such as with OpenAI, operating on Azure. The IDC’s Franco Chiam attributed the uptick in cloud revenue to the pivotal role cloud plays in enabling generative AI, supporting its development, deployment, and foundation.
Gartner’s Jason Wong noted that Microsoft’s Azure growth is augmented by both its customers and partners, including OpenAI. The IDC’s Chiam emphasized the role of cloud in facilitating digital transformation and supporting the increased adoption of genAI for scalability and flexibility. Both Microsoft and Google have introduced various genAI services, contributing to the overall growth in cloud revenue.
At Google, CFO Ruth Porat highlighted the strong demand for their vertically integrated AI portfolio, creating new opportunities across product areas. The company reported cloud revenue growth of 22% year-on-year in the previous quarter, with a total annual revenue of $33 billion, up almost 27% from 2022. Sundar Pichai, Google’s CEO, attributed some of the growth to cost optimization strategies amid uncertain economic conditions and the embrace of generative AI, which attracted new customers. In 2023, Google introduced updates to its Vertex AI platform and new large language models, including Duet AI.
Microsoft took a prominent role with the launch of Open AI’s ChatGPT in 2023, prompting competitors like Google and AWS to introduce their versions of generative AI platforms. Google unveiled Gemini capabilities, showcasing multimodal AI in comparison to ChatGPT. Analysts are eagerly awaiting Amazon’s report on Feb 1 to determine if AWS has experienced similar gains from AI.
