- Microsoft has long been the number two provider in the cloud market by revenue
- But a new analysis from J. Gold Associates indicates Google Cloud could be closer on Microsoft's heels than previously thought
- Google Cloud's pure cloud hosting revenue could soon surpass that of Microsoft Azure
Earnings reports can be, for lack of a better term, a crapshoot. A smokescreen, if you will. Companies tend to bundle multiple products into a single reporting segment and often don’t provide a revenue breakdown, making it harder than it needs to be to figure out what comes from where. But analyst Jack Gold attempted to zero in on cloud hosting revenue for the big three hyperscalers and what he found was….interesting to say the least.
The long and the short of it? Google Cloud’s pure cloud hosting revenue is likely much closer to Azure’s than Microsoft wants it to be. Within $1 billion, in fact. And the former could soon overtake Microsoft’s number two spot in the market, according to Gold’s calculations.
“Google Cloud is already nearly equal to Microsoft Azure in revenues, and has a higher revenue growth rate than Microsoft Azure,” Gold wrote in a research note. “By the end of the next four years of revenue growth, we project Google Cloud’s revenues will be 55% greater than Azure at current growth rates.”
Wait, how?!
Let’s back up for a second. Fierce normally reports cloud market share based on figures from Synergy Research Group, which tallies revenue earned from infrastructure-as-a-service, platform-as-a-service and software-as-a-service products. By Synergy’s tally, Amazon, Microsoft and Google Cloud had market shares of 31%, 20% and 13%, respectively, as of the end of Q3 2024.
Synergy’s Chief Analyst John Dinsdale told Fierce that given it pegged the overall cloud market at around $84 billion and there was a 7% difference in the second and third place market share, that would mean Google Cloud was around $6 billion behind Microsoft. Dinsdale couldn't make future predictions, but he noted, “Historically it has taken about twelve quarters for Google's revenue in this market to grow by $6B. Over those same twelve quarters, Microsoft's revenue has grown by almost $10B.”
However, based on Gold’s math (and trust us, we’ve seen his spreadsheets), the gap isn’t nearly that large.
What accounts for the difference? Well, Gold said he and his team at J. Gold Associates did their best to come up with pure cloud hosting revenue figures for each of the big three hyperscalers. For Microsoft, that put Azure revenue at about 50% of reported “cloud” revenue, a category that Gold noted is cluttered with other products.
The picture painted by Gold’s forecast is this: Google Cloud is less than $1 billion away from Microsoft’s Azure cloud revenue, and it’s growing at nearly twice the pace on average. That means Google Cloud could snag the number two market share spot (based on revenue) as soon as the end of this year.
And even if he’s off by 20% or 30% in terms of Microsoft’s Azure revenue, Gold said the takeaway remains that Google is much closer than Microsoft probably wants it to be. (But both are still lightyears behind Amazon.)
Climbing the ladder
Asked how Google Cloud is gaining so quickly on Microsoft, Gold offered up a few factors working in Google's favor. First, he said, Google Cloud is faring “much better” in the small and medium business segment than Microsoft is. It’s also got momentum in the public sector space and is using aggressive pricing to its advantage. Microsoft, meanwhile, does well with large enterprises but competes with the likes of IBM and SAP in that arena.
Finally, Gold said Google Cloud is “making a big push into AI,” whereas Microsoft “still has less of a position here despite its OpenAI relationships.”
Does this mean Microsoft is working with a losing strategy? Not necessarily, Gold added.
“AI will float all boats,” he explained. “But it does mean Microsoft with Azure has not been aggressive enough in going after markets Google has.”
Could this pressure put more pep in Microsoft’s step? Quite possibly, yes. Already, Microsoft has announced plans to spend $80 billion on AI-enabled data center expansions across the globe in 2025. You can read more about that here.