Google’s cloud outpaces rivals in third quarter as AI battle heats up

Published

12 months ago

November 2, 2024

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Alphabet CEO Sundar Pichai speaks at the Munich Security Conference at the Hotel Bayerischer Hof in Munich, Germany, on February 16, 2024.

Tobias Hase | Picture Alliance | Getty Images

With Wall Street laser focused on cloud computing this week, Google outpaced its rivals in growth, a key sign for investors that the internet company is gaining traction in artificial intelligence.

Google’s cloud business, which includes infrastructure as well as software subscriptions, grew 35% year over year in the third quarter to $11.35 billion, accelerating from 29% in the prior period.

Amazon Web Services, which remains the market leader, grew 19% to $27.45 billion, meaning it’s more than twice the size of Google Cloud but expanding about half as quickly. Second-place Microsoft said revenue from Azure and other cloud services grew 33% from a year earlier.

Five of the six trillion-dollar tech companies reported results this week, with AI chipmaker Nvidia as the outlier. Amazon, Alphabet and Microsoft always report around the same time, giving investors a snapshot of how the cloud wars are playing out.

“While Alphabet has often been criticized as a Johnny-one-note for its dependence on digital advertising, the rapid growth of Google Cloud has begun to diversify the company’s revenue,” analysts at Argus Research, who recommend buying the stock, wrote in a report on Oct. 31.

For a long time, cloud was a money sink for Google, but that’s no longer the case.

Google reported a 17% cloud operating margin in the third quarter, after first turning a profit last year. It was “a real beat to expectations there,” Melissa Otto, head of technology, media and telecommunications sector research at Visible Alpha, said on CNBC this week. She said she isn’t sure if the company can sustain that level of profitability.

Otto: The scale of Alphabet's cloud business, and spend on AI infrastructure, will be critical

The opposite story has been true at Amazon, which has long counted on AWS for the bulk of total profit.

AWS’ operating margin for the the third quarter was 38%, which analysts at Bernstein described as a “whopping” number. Executives have been careful with hiring and have discontinued less popular AWS services. Also, at the beginning of 2024, Amazon extended the useful life of its servers from five years to six, a change that boosted the operating margin by 200 basis points, or 2 percentage points.

Microsoft this week started giving investors more accurate readings of its Azure public cloud. When the company reported Azure revenue growth in the past, the number would include sales of mobility and security services and Power BI data analytics software. Microsoft, which is the lead investor in ChatGPT creator OpenAI, is getting a hefty boost from AI services.

“Demand continues to be higher than our available capacity,” Amy Hood, Microsoft’s finance chief, said on the company’s earnings call.

While Azure growth in the current quarter will moderate a bit, Hood said it should pick up in the first half of 2025 “as our capital investments create an increase in available AI capacity to serve more of the growing demand.”

Amazon is seeing a similar dynamic.

“I think pretty much everyone today has less capacity than they have demand for, and it’s really primarily chips that are the area where companies could use more supply,” Amazon CEO Andy Jassy said on his company’s earnings call.

To help ease the burden, Amazon relies to a degree on its own processors, in addition to Nvidia’s graphics processing units (GPUs). Jassy said clients are showing interest in Trainium 2, the company’s second-generation chip for training models.

“We’ve gone back to our manufacturing partners multiple times to produce much more than we’d originally planned,” he said.

Google is now on the sixth generation of its own custom tensor processing units for AI. CEO Sundar Pichai told analysts that he’d been spending time with the TPU team.

“I couldn’t be more excited at the forward-looking roadmap, but all of it allows us to both plan ahead in the future and really drive an optimized architecture for it,” he said.

Microsoft introduced its own AI chip in the cloud, Maia, a year ago. The company has started to use Maia chips to power its own services, but it hasn’t yet made it available for customers to rent out, a spokesperson said.

Analysts at DA Davidson said in a note this week that they don’t see this as a battle Microsoft can win going up against Amazon and Google. They have a neutral rating on Microsoft.

Oracle, which generally ranks fourth among U.S. cloud infrastructure companies, is expected to report quarterly results in December. In its last report, Oracle said cloud infrastructure revenue jumped 45% to $2.2 billion, up from 42% growth in the prior quarter.

Oracle recently partnered with its three bigger cloud rivals to make its databases available on their services, a move that Chairman Larry Ellison said on the last earnings calls, “will turbocharge the growth of our database business for years to come.”

WATCH: Otto: The scale of Alphabet’s cloud business, and spend on AI infrastructure, will be critical

Technology

More demand than supply gives companies an edge, Jim Cramer says

Published

9 hours ago

October 24, 2025

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More demand than supply gives companies an edge, Jim Cramer says

“Supply constrained,” are the two of the most important words CNBC’s Jim Cramer said he’s heard so far during earnings season and explained why this dynamic is favorable for companies.

“When you’re supplied constrained, you have the ability to raise prices, and that’s the holy grail in any industry,” he said.

Intel‘s strong earnings results were in part because of more demand than supply, Cramer suggested. He noted that the company’s CFO, David Zinsner, said the semiconductor maker is supply constrained for a number of products, and that “industry supply has tightened materially.”

Along with Intel, other tech names that are also supply constrained and performing well on the market include Micron, AMD and Nvidia, Cramer continued.

These companies don’t have enough product in part because the storage needs of artificial intelligence are incredible high, Cramer said. He added that he thinks demand has overwhelmed supply because semiconductor capital equipment companies didn’t manufacture enough of their own machines as they simply didn’t anticipate such a volume of orders.

Outside of tech, Cramer said he thinks airplane maker Boeing and energy company GE Vernova are also supply constrained, adding that he thinks the former will say it’s short on most of its planes when it reports earnings next week. GE Vernova is supply constrained with its power equipment, like turbines that burn natural gas, he continued, which is the primary energy source for the ever-growing crop of data centers.

GE Vernova and Boeing are also set to be winners because they make big-ticket items that other countries can buy from the U.S. to help close the trade deficit, Cramer added.

“In the end, we have more demand than supply in a host of industries and that’s the ticket for good stock performance,” he said. “I don’t see that changing any time soon.”

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Technology

3 takeaways from Intel earnings: Cash flow, foundry progress and hardware surprise

Published

14 hours ago

October 24, 2025

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3 takeaways from Intel earnings: Cash flow, foundry progress and hardware surprise

Wall Street remains skeptical on Intel despite its return to profitability

Intel snapped a losing streak of six straight quarterly losses and returned to profitability in the third quarter.

In its first earnings report since the Trump administration acquired a 10% stake in the company, the U.S. chipmaker posted strong revenue, noting robust demand for chips that it expects to continue into 2026.

Client computing revenue, which includes chips for PCs and laptops, grew 5% year over year, benefiting from PC market stabilization and artificial intelligence PC prospects.

CEO Lip-Bu Tan said in a call with analysts Thursday that artificial intelligence “is a strong foundation for sustainable long-term growth as we execute.”

The chip strength and demand were bright spots, but there were areas of concern as well, with the company’s foundry business still needing a big break.

Here are three takeaways from the chipmaker’s Q3 report:

Cash flow

“We significantly improved our cash position and liquidity in Q3, a key focus for me since becoming CEO in March,” Tan said on a call with analysts Thursday.

Intel landed an $8.9 billion investment from the U.S. government in August, along with $2 billion from Softbank, but has not yet received the $5 billion tied to a deal with Nvidia. The company expects that deal to close by the end of Q4.

With all of those transactions completed, plus the Altera sale, Intel will have $35 billion in cash on hand, CFO David Zinser told CNBC.

The U.S. government is the company’s biggest shareholder, and Intel stock is up more than 50% since Aug. 22, when Commerce Secretary Howard Lutnick announced the deal.

“Like any shareholder, we have to keep in touch with them,” Zinser said of the U.S. stake. “We don’t tell them how the numbers are going before the quarter. We generally talk to them like Fidelity,” another Intel shareholder.

Stock Chart IconStock chart icon

Intel 3-month stock chart.

Foundry

The firm’s foundry remains a work in progress.

Revenue fell 2% over the year before, and it has yet to land a major customer.

Intel now has two fabs running 18A nodes, which are designed for AI and high-performance computing applications.

“We are making steady progress on Intel 18A,” Tan said of its latest chip technology. “We are on track to bring Panther Lake to market this year.”

Zinser said the more advanced 14A nodes won’t be put in supply until the company has “real firm demand.”

Old stuff still selling

Zinser said the company’s older chipmaking processes, or nodes, have continued to do well, “and that was probably the part that was more unexpected.”

Zinser said the chipmaker met some of the central processing unit (CPU) demand with inventory on hand, but they will be behind in Q1, “probably Q2 and maybe in Q3.”

The supply crunch has been with older Intel 10 and 7 manufacturing technologies.

Many customers are opting for less advanced hardware to refresh their operating systems, demonstrating enterprises aren’t waiting for cutting-edge chips when proven technology gets the job done.