Inflation Concerns Not Stalling Public Cloud Growth at AWS, Microsoft, Google

The big three public cloud providers remain optimistic about growth prospects even amidst concerns over inflation that continues to grip the economy.

This week Amazon Web Services (AWS), Microsoft, and Google all reported quarterly earnings, and the earnings of all three public cloud providers once again showed there is still a large demand for cloud computing resources despite the current economic climate.

Both Google and Microsoft reported earnings on July 26, while Amazon reported its progress on July 28. For its fiscal 2022 second quarter, Google's parent company Alphabet reported $6.3 billion in cloud revenue, up by 35% year-over-year. Microsoft reported its combined cloud revenue at $25 billion for a 28% gain, while Amazon reported that AWS revenue was $19.74 billion, a 33% gain.

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"As the cloud market continues to surge, the biggest story in Q2 was all about macroeconomics rather than actual cloud usage," John Dinsdale, a chief analyst at Synergy Research Group, wrote in a statement. "However, the fact remains that the underlying growth in cloud usage continues to grow at truly impressive rates."

Uncertain Economic Outlook Not Fazing Google Cloud

Alphabet CEO Sundar Pichai was asked multiple times during his company's earnings call about the macroeconomic landscape as inflation continues to rise. His response time and again was that of a positive outlook and strategy.

"With an uncertain global economic outlook, our strategy to invest in deep technology and computer science to build helpful products for the long term is the right one," Pichai said.

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Pichai added that he continues to see substantial market opportunity in the cloud and that he feels like it's still in the early stages. He noted that he is constantly in conversations with customers, big and small, who are just undertaking the journey to the cloud.

"You do see a varying mix of some customers impacted in terms of their ability to spend, some customers just slightly taking longer times," Pichai said. "But I don't necessarily view it as a longer-term trend as much as working through the macro uncertainty everyone is dealing with."

Microsoft CEO Sees Cloud as Being Key to Growth

Microsoft CEO Satya Nadella was also peppered with questions during his company's earnings call about the state of the economy. Overall, Microsoft is not immune to what's happening in the macro broadly, Nadella said. That said, he does see the cloud as a way to hedge against inflation.

Moving to the cloud is the best way for an organization to better control IT spending when there is demand uncertainty, according to Nadella. The cloud offers the promise of consumption-based pricing, and Microsoft is also taking steps to help its customers optimize their cloud spending.

Related: 4 Reasons Why AWS Could Lose Its Dominant Cloud Market Share

"That's why I think coming out of this macroeconomic crisis, the public cloud will be even a bigger winner because it does act as that deflationary force," Nadella said.

Amazon Web Services Growing at a Fast Pace

AWS continues to grow at a fast pace, according to Amazon CFO Brian Olsavsky, who added that the cloud provider is still in the early stages of enterprise and public sector adoption of the cloud.

Rising inflation and the potential of an economic slowdown can actually help promote cloud growth, in Olsavsky's view. Amazon saw similar rough patches in the economy in 2008 and again in 2020. The company learned lessons from both timeframes, most notably that an economic downturn can be an opportunity to help organizations move to the cloud.

"When you're trying to launch a new product or service and you have to face getting capital for a data center and building it yourself or moving to the cloud and essentially buying incremental infrastructure capacity, cloud computing really shows its value. So we're prepared," he said.

"Just like when the slowdown hit in 2020, we are prepared to help customers optimize their costs," Olsavsky said. "We'll also, again, continue to find new customers and new industries, including government agencies."