Google just surged ahead in the cloud and AI game. Wall Street’s all over this: Google Cloud posted 35% growth in Q3, reaching $11.35 billion. That’s faster than the previous quarter’s 29% growth, and it’s shaking up the market.
Investors are noticing that Google’s not just about ads anymore; its cloud segment is bringing in big numbers. This tech titan has been leaning heavily into AI, and it’s paying off. Google’s cloud, which includes both infrastructure and software, is finally on solid ground after years of pouring money into it.
Meanwhile, Amazon Web Services (AWS) remains king in size, raking in $27.45 billion—a whopping 19% increase. AWS may be more than twice Google Cloud’s size, but it’s growing at about half the speed. Microsoft’s Azure came in second with 33% growth.
It’s a tight race among these three, but Google’s rapid pace shows it’s not backing down. With these giants reporting earnings at the same time, investors got a full view of how each is hustling to win the AI-powered cloud market.
Google expands AI ambitions
Google Cloud’s Q3 operating margin hit 17%, a solid jump after the business turned profitable just last year. For years, this was a money drain for Google.
Now it’s a different story. “A real beat to expectations there,” said Melissa Otto, Visible Alpha’s head of tech research. She’s cautious, though, unsure if Google can keep up this profit level, but it’s clear Google’s making moves that pay off.
Over at Amazon, AWS has always been its cash cow. Its Q3 operating margin sat at a fat 38%, a number analysts at Bernstein called “whopping.” Amazon’s tightened hiring, cut underperforming AWS services, and extended server lifespans from five to six years.
This alone boosted margins by 2%. AWS remains the profit engine here, driving Amazon’s overall income while keeping its cloud dominance strong.
Microsoft threw a curveball with Azure’s numbers this quarter, breaking down what exactly goes into its Azure public cloud revenue. Before, Microsoft lumped in other products, like security services and Power BI, when reporting Azure revenue. Now, investors get a clearer picture.
Azure growth may slow a bit this quarter, but CFO Amy Hood expects it to pick up by early 2025 as the company adds capacity. “Demand continues to be higher than our available capacity,” Hood explained, saying Microsoft’s capital investments are prepping Azure for the rising AI load.
Race for AI power: Custom chips and NVIDIA’s soaring demand
Amazon and Google are both betting on custom AI chips to meet demand. AWS customers are showing interest in Amazon’s Trainium 2, its second-generation AI chip for training models.
“We’ve gone back to our manufacturing partners multiple times to produce much more than we’d originally planned,” Amazon’s CEO Andy Jassy admitted, signaling they can’t keep up with demand even with in-house processors and NVIDIA’s GPUs.
Google’s not far behind, rolling out its sixth-gen Tensor Processing Units (TPUs). CEO Sundar Pichai said he’s working closely with the TPU team, eager about their roadmap. Google’s custom TPUs are pushing AI capabilities further.
Microsoft’s approach is similar, introducing its AI chip Maia last year to power its own services. So far, they’ve kept Maia under wraps for internal use only. Analysts at DA Davidson doubt Microsoft can edge out Amazon and Google here, rating Microsoft as neutral in this AI race.
Its huge investment in OpenAI, however, keeps Azure well-placed in the AI game. NVIDIA, meanwhile, is scoring big. Its AI chips are in such demand that the company’s revenue has doubled in each of the last five quarters.
Intel’s Dow exit and the rising AI giants
This AI-driven boom even led to NVIDIA replacing Intel in the Dow Jones Industrial Average, an index that traditionally held back on tech stocks. NVIDIA shares have jumped 170% this year alone, while Intel’s have plummeted over 50%. NVIDIA’s H100 chips are critical to AI infrastructure, and investors are scrambling to get a piece of the action.
On November 8, Intel will exit the Dow, making way for NVIDIA. Intel’s struggles with manufacturing and its failure to break into AI left it lagging behind. The company’s central processors lost ground to AMD, and now Intel faces challenges just keeping up in its core business.
Shares are down, and Intel’s already cut 16,500 jobs to reduce costs and real estate. They’re trying to right the ship, but the AI train has left the station.
NVIDIA, on the other hand, is full steam ahead, with Blackwell chips up next, and demand so intense it’s dubbed “insane.” The Dow’s shift reflects this new era, where AI tech dominates, and NVIDIA’s place in the index signals a major shift for the entire market.
With NVIDIA joining the Dow, four of the six trillion-dollar tech companies are now in the index, with only Meta and Alphabet left out.
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