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The Only Direction Cloud Companies Are Going Is Up

We now have earnings reports from all the major cloud infrastructure vendors – Amazon AMZN, Microsoft MSFT, Alphabet GOOGL and International Business Machines IBM – so it’s time to compare notes on how they did this quarter.

To be fair, they all have huge businesses other than that of selling infrastructure as a service, so overall results aren’t representative, or even indicative of the explosive growth they’re seeing in the cloud. And because of the size of their overall businesses and the way they categorize products, they aren’t bound by regulation to report the cloud business separately.

Amazon Still Leads the Pack

Amazon, being a retailer, can clearly segregate the cloud business from the rest. Being the market leader with head and shoulders above the others, AWS is also of a size that requires separate disclosure. So here we have some numbers: AWS grew 42% over the June quarter of the prior year, which was however less than the 47% increase in related operating expenses. But a $16.4 billion annualized revenue run rate is nothing to scoff at. What’s more, the higher expenses may be expected to fuel continued growth in the future.

For good measure, management listed the new customers in the quarter that included Ancestry, the global leader in family history and consumer genomics; Hightail, a virtual workspace for creative collaboration and file sharing; and California Polytechnic State University that transferred all of their operations to AWS as well as Discovery Communications, Morningstar, BP and Zillow Group that transferred “significant” portions. It also provided a long list of companies using its AI and machine learning solutions.

In addition to the 16 infrastructure regions (44 availability zones) it now operates, Amazon said that come 2018, it would add another infrastructure region in Hong Kong and a...