With Alibaba's belated earnings, the Q1 scorecards of the five global cloud giants are now complete.
1
Amazon AWS
Global Cloud Leader
Q1 revenue $21.354B, up 16% year over year, down slightly sequentially; operating income $5.123B, down 21% year over year; operating margin 24%, down 11 percentage points year over year.
AWS Q1 revenue was 17% of Amazon total revenue but contributed 107% of Amazon operating income.
Since Q3 last year, enterprises of all sizes began optimizing cloud spend, slowing growth; this trend persists; April AWS year-over-year growth slowed 5 percentage points vs Q1.
2
Microsoft Azure
Second-Largest Global Cloud
Q1 revenue $14.529B, up 27% year over year, growth continuing to decelerate;
Azure's Intelligent Cloud (Server+Azure+Enterprise Services) operating income $9.476B, up 14% year over year, a record high; operating margin 43%.
Intelligent Cloud Q1 revenue was 42% of Microsoft total revenue, contributing 42% of Microsoft operating income.
Azure share gains continue; Azure OpenAI Service customers >2,500, up 10x sequentially; Azure Arc >15,000 customers, up 150% year over year.
3
Google Cloud
Third-Largest Global Cloud
Q1 revenue $7.454B, up 28% year over year, growth still above Microsoft and Amazon. Operating income $191M, operating margin 3%, first profitable quarter ever, mainly due to operating income adjustment stripping out DeepMind and other AI investments.
Over the past three years, GCP annualized bookings up nearly 500% year over year; $250M+ deal count up >300%; Cloud cybersecurity products >30,000 enterprise customers.
4
Alibaba Cloud
China's Cloud Leader
Q1 revenue RMB 18.6B ($2.706B), down 2% (-10% USD), still sluggish.
Q1 EBITA profit RMB 385M, EBITA margin 2.1%, profitable for 9 consecutive quarters, though EBITA basis and includes DingTalk.
5
Oracle Cloud
Global cloud #4
Q1 revenue was $4.053B, up 45% year over year; by scale it should rank as the fourth-largest cloud globally, with its disclosure comprising $1.2B of IaaS (YoY +55%) and $2.9B of SaaS (YoY +42%).
Oracle's cloud reporting is relatively messy, with a complex composition and no direct profitability disclosure.
6
DigitalOcean
AWS for Everyone
Q1 revenue was $165M, up 30% year over year; ARR $669M, up 28% year over year; gross margin 56%, down 6 percentage points year over year; operating loss widened, operating margin -20%; Monthly ARPU $88.35, up 29% year over year.
Q1 EBITDA profit $56.2M, up 46% year over year; EBITDA margin 34%, up 3 percentage points sequentially; the disappointment was this quarter's Net Dollar Retention Rate of 107%, down 10 percentage points year over year.
DigitalOcean's standout feature is its low sales expense ratio, only 11% this quarter; long below R&D and G&A expense ratios. The margin decline this quarter was mainly due to gross margin compression and restructuring charges. Sustained gross margin decline is a concern; need to watch whether gross margin can return to 60%+.
DigitalOcean's clear characteristic is a customer base dominated by SMBs, sensitive to macro cycles, with revenue growth hitting a bottleneck; fortunately ARPU continues to rise. The company cites a sufficiently dispersed customer base and still-low cloud penetration, leaving ample future runway.
Conclusion
Overall, the global cloud Big 3 continued to deliver steadily, but macroeconomic pressure is starting to show; against high comps, growth continues to decelerate, and cloud giants are all helping customers cut costs, pressuring margins. However, the industry remains a long-term beneficiary of digitalization and hybrid-cloud trends.
Macro downturn prompted cloud companies to tighten capex; FAMG Q1 total capex fell 3.4% year over year, the first decline in 16 quarters. However, with AI/ML heating up again, 2023 cloud capex could rebound, and the AI wave may drive a cloud recovery. We still believe sustained cloud prosperity is the most critical link in the data-center semiconductor boom.