Google and Microsoft report increased cloud revenue following increased demand for generative AI

The momentum in AI deployment is becoming a key driver for cloud adoption as evidenced by revenue reports from Microsoft and Google. 2024 is looking promising for the two tech giants that have seen cloud revenue slow in recent quarters.

Google reported cloud revenue of $9.19 billion for the quarter, up 28% from a year earlier. (Alphabet posted revenue of $86 billion for the same period).

Microsoft, on the other hand, surpassed $33 billion in revenue which is unprecedented. “It was a record quarter, driven by the continued strength of Microsoft Cloud, which surpassed $33 billion in revenue, up 24% (22% in constant currency),” Microsoft CEO Satya Nadella said during an earnings call.

“By infusing AI across every layer of our tech stack, we are winning new customers and helping drive new benefits and productivity gains,” the CEO said.

Microsoft Azure AI now has 53,000 customers, a third of whom subscribed to its services in the last 12 months.

Lee Sustar, a principal analyst at Forrester, notes that it’s the same story with Google. By simply incorporating AI into its offering, Google has become more attractive to business leaders which has helped Google Cloud reach profitability.

“Google Cloud has left behind years of quarterly losses and now accounts for 10% of Alphabet’s revenue, as it uses the AI momentum to reintroduce itself to enterprise IT leaders as a partner,” he said.

This is only the beginning. The increased adoption of GenAI is expected to drive even more cloud usage as enterprises aim for scalability and flexibility.

“Cloud and infrastructure play a crucial role in enabling generative AI, as the technological foundation that supports the development, deployment and foundation of this advanced AI system,” notes Franco Chiam, IDC’s vice president of cloud for the Asia Pacific region.

Analysts are now waiting to see what Amazon reports to see whether AWS has seen similar gains from AI.