The cloud industry’s power trio fell short of analyst expectations in their most recent respective quarters as capacity constraints proved to be a real problem for the hyperscalers.
Amazon Web Services (AWS) reported $28.8 billion in revenue for the quarter ending Dec. 31, up 19% from the previous year, and a sliver under StreetAccount analysts’ estimate of $28.84 billion. In comparison, Microsoft’s Intelligent Cloud unit brought in $25.5 billion in revenue, up 19% YoY, while Google Cloud reported just under $12 billion in revenue for the quarter, an almost 30% uptick from the year prior.
Amazon. On a call with analysts last week, Amazon CEO Andy Jassy defended the subsidiary’s growth for the quarter, blaming it largely on capacity constraints it is encountering.
“It is true that we could be growing faster if not for some of the constraints on capacity,” Jassy said on the Feb. 6 call. “And they come in the form of, I would say, chips from our third-party partners come in a little bit slower than before.”
Jassy told shareholders that he expects the constraints to lighten up in the second half of 2025 and that the hyperscaler will spend upward of $100 billion in capex this year. The CEO—who made sure to tout the company’s strong relationship with Nvidia during the call—added that while he expects that AWS’s growth will be “lumpy” over the upcoming years, he remains optimistic at what’s to come.
Google. Alphabet CFO Anat Ashkenazi also referenced capacity restraints during the company’s Q4 earnings call held on Feb. 4. She told analysts that AI demand exceeded available capacity at the end of last year.
“We are in a tight supply–demand situation, working very hard to bring more capacity online,” she said, adding that the company will continue to increase its investments in capex (by $75 billion this year to be exact) to increase its capacity.
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On a bright note, Sundar Pichai, CEO of Google and Alphabet, told analysts on the call that Google data centers are now delivering four times as much computing power per unit of electricity compared to its performance five years ago and that the company had broken ground on 11 data center regions in 2024.
“We have a unique advantage, because we develop every component of our technology stack, including hardware, compilers, models, and products,” Pichai said. “This approach allows us to drive efficiencies at every level, from training and serving, to developer productivity.”
Microsoft. Microsoft CFO Amy Hood on the Jan. 29 call said the company is operating from a “pretty constrained capacity place.”
“You have to have space, which I generally call long-lived assets, right?” Hood said. “That’s the infrastructure and the land, and then you have to have kits. We’re continuing and you’ve seen that’s why our spend has pivoted this way to be in the long-lived investment.”
Microsoft reported $22.6 billion in capex, including finance leases, for the quarter. Hood said that she expects to see a similar spend in the remaining two quarters. Jackson Ader, managing director of software equity research for KeyBanc Capital Markets, told IT Brew that the large capex spend from the hyperscalers reflects what is to be expected onward.
“Their capital expenditures came in higher than consensus expectations and the same was true for Amazon and the expectations for capex going forward,” he told IT Brew.