In the previous article "Global Cloud Giants Q1: AI Revenue Explodes, Non-AI Demand Recovers," I noted that AI business had become a profit machine for cloud companies while non-AI demand regained growth. With Alibaba's delayed report, the Q2 scorecards for all five global cloud giants are now in. Cloud giants see massive AI demand and continue to ramp AI investment.
1
Amazon AWS
Global Cloud Leader
Q2 revenue $26.281B, up 19% year over year, growth accelerating 2 percentage points sequentially; up 5% sequentially. Operating income $9.334B, up 74% year over year; operating margin 36%, up 12 percentage points year over year.
AWS Q2 revenue represented 18% of Amazon total revenue and contributed 64% of Amazon's operating income.
Q2 AI and non-AI demand both growing. AWS AI revenue run rate reached several billion dollars. Over the past 18 months, AWS launched more than 2x the machine learning and generative AI features of all other major cloud providers combined. AWS's core philosophy is offering choice: some customers want price-performance, so beyond the broadest NVIDIA portfolio, AWS developed its own training and inference chips; Trainium2 launching by year-end. Heavy AI investment reflects massive visible demand. Depreciation useful life extended from 5 to 6 years starting Q1, contributing 2 percentage points of AWS margin expansion year over year this quarter. AWS margins will have normal seasonal fluctuations.
2
Microsoft Azure
Second-Largest Global Cloud
Q2 revenue $19.145B, up 29% year over year, growth decelerating 2 percentage points sequentially; growth tied with Google Cloud for the lead among the big three. Up 1% sequentially.
Intelligent Cloud (Server + Azure + Enterprise Services) operating income $12.859B, up 22% year over year, marking the 6th consecutive quarterly record. Operating margin 45%.
Intelligent Cloud Q2 revenue represented 44% of Microsoft total revenue and contributed 46% of Microsoft operating income.
In June, Azure's non-AI growth in parts of Europe fell slightly short of expectations, causing Azure growth to miss the high end of prior guidance. However, Azure consumption growth continues to exceed overall Azure growth, with momentum persisting into the second half. Azure market share continues to rise. Azure AI customers exceed 60k, up nearly 60% year over year; average customer spend rising. Azure Arc has 36k customers, up 90% year over year. MaaS (Model as a Service) paid customers doubled sequentially. Azure gross margin improved despite massive infra investment. AI contributed 8% ($1.2B) to Azure growth this quarter. AI supply constraints persist through FY25H1; FY25H2 expected acceleration as AI capacity increases.
3
Google Cloud
Third-Largest Global Cloud
Q2 revenue $10.347B, up 29% year over year, growth accelerating 1 percentage point. Operating income $1.172B; operating margin 11%, a new record high.
Google Cloud quarterly revenue topped $10B for the first time, driven by GCP. AI contribution to growth significant. Operating income topped $1B for the first time. AI-related cloud revenue has reached several billion dollars this year. Top 100 cloud customers mostly using it; over 2M developers using it. Over 1.5M developers using Gemini in dev tools; Gemini embedded in 6 Google products with 2B+ monthly active users. Workspace revenue up year over year, driven by ARPU growth.
Google Cloud revenue growth is no longer in question. Management previously guided for year-end YouTube + Cloud revenue run rate above $100B, implying Q4 Google Cloud revenue around $15B. Previously noted the biggest watch item for Google Cloud this year: can margins hit 20%? Q2 was 11%.
4
Alibaba Cloud
China's Cloud Leader
Q2 revenue RMB 26.549B ($3.653B), up 6% year over year; excluding internal consolidation, up 6%. Core public cloud businesses including elastic compute, database, and AI continued double-digit year over year growth. AI-related revenue continued triple-digit year over year growth. Alibaba Cloud Bailian platform paid users up over 200% sequentially.
Q2 EBITA profit RMB 2.337B; EBITA margin 8.8%, a record high. Profitable for 14 consecutive quarters.
5
Oracle Cloud
Global Cloud Challenger
Q2 revenue $5.311B, up 20% year over year, growth decelerating 5 percentage points sequentially. Excluding Cerner, revenue $4.7B, up 23% year over year. OCI (IaaS) revenue $2B, up 42% year over year; SaaS revenue $3.3B, up 10%. IaaS gross margin expanded significantly this quarter, scale effects evident; IaaS gross margin and operating margin expected to continue climbing.
Gen2 infra Cloud revenue up 44% year over year driven by LLM training demand, annualized $7.4B. OCI consumption revenue up 53% year over year, constrained by supply or would be higher. Cloud Database up 26% year over year, annualized $2B. RPO $98B, up 44% year over year. Over 30 new large AI deals this quarter, including OpenAI deal >$12.5B; YTD large deals exceed $17B. 23 data centers interconnected with Azure/Microsoft, 11 live. Partnering with Google: 12 data centers to interconnect with Google Cloud; Oracle Database on Google Cloud launching in September.
OCI expected to grow sequentially going forward. OCI Supercluster plans to deploy 64,000 Blackwell or GB200 GPUs for customer LLM training. FY25 OCI revenue expected up 50%+ year over year; FY25 capex doubling year over year.
6
DigitalOcean
AWS for Everyone
Q2 revenue $192M, up 13% year over year. ARR $781M, up 15% year over year, with AI/ML ARR up over 200%. Gross margin 61%, up 1 percentage point year over year. Operating margin 12%. Monthly ARPU $99.45, up 9% year over year. Q3 revenue guided up 11% year over year.
Q2 EBITDA profit $81.59M, up 13% year over year. EBITDA margin 42%. Net Dollar Retention Rate held at 97%, still below 100%.
DigitalOcean's defining trait: customers are mainly SMBs, highly sensitive to macro cycles. While ARPU keeps rising, customer count has hit a growth ceiling. Previously noted its core problem is lack of growth — fatal for a small-scale company. Also noted the rise of AI cloud players like CoreWeave pressuring traditional small cloud vendors. This quarter DigitalOcean began seizing the AI opportunity: AI-related ARR surged; preparing to offer H100 instances to 638k customers.
Conclusion
Cloud capex exploded again this quarter: FAMG Q2 capex up 59% year over year, a record high for the 3rd consecutive quarter, up 19% sequentially. As cloud giants repeatedly cite severe AI supply shortages, future cloud capex concentration in GPU servers will keep rising. The market keeps calling this overinvestment — a scene eerily reminiscent of the early cloud era.
