Cloud Wars Live with Bob Evans

In today's Cloud Wars Minute, I break down the reshuffled hyperscaler rankings and what AWS's comeback means for the AI economy.

Highlights

00:03 — The third hyperscaler reported its numbers late last week. That was Amazon's AWS unit. Fantastic quarter for AWS. Best in four or five years. It had what I called an awesome Q2, and in doing so, we've seen a complete reshuffling of the growth standings among the hyperscalers.

01:18 — Microsoft, for the same period, its fiscal Q4 grew 27% to $59.3 billion, and Google Cloud was up an incredible 82% to almost $25 billion. We see Google Cloud and now AWS on a very nice continuous upswing, while Microsoft has leveled off.

03:05— Inside AWS, the backlog soared, up 154% to almost $500 billion. Andy Jassy said Amazon will spend in 2026 $220 billion on CapEx, almost all of which will go toward building the data centers necessary to fund this expansion in cloud and AI.

04:19 — The smallest backlog number of the four hyperscalers is AWS at $496 billion. Microsoft is around $675 billion, Google Cloud is $514 billion, and Oracle is about $636 billion. Together they represent well over $2 trillion in backlog.

05:12 — I think it's great seeing AWS back in high-growth mode. It makes the competition better, and it certainly is a great thing for customers, who now have choices of fantastic suppliers across the four hyperscalers: AWS, Google Cloud, Microsoft, and Oracle.

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In today's Cloud Wars Minute, I examine why SAP's biggest competitive challenge may soon come from OpenAI and Anthropic rather than traditional enterprise software rivals.

Highlights

00:00 — SAP released its Q2 numbers last week, and a couple of interesting things happened there. First of all, strong Q2 cloud revenue growth, 24%. But even higher than that was its backlog growth, which went up 26%. CEO Christian Klein tied that specifically to the company's transformation, started about two years ago, to shift more and more of the sales effort from the direct channel to the indirect channel.

00:56 — It had resellers whose big concern a number of years ago was, "Well, what margin am I going to get? What discount do I get?" Today, the focus, through the efforts of Chief Partner Officer Karl Fahrbach and Klein, has shifted very, very much toward, "How do we get successful outcomes? How do we ensure these AI deployments happen smoothly, rapidly, and effectively at the customer site?"

01:29 — It's about $7.2 billion. Within that, the Cloud ERP Suite was up 27% to $6.4 billion, and the current cloud backlog, that 26% jump, pushed it to $26.3 billion. It said growth for full-year 2026 will be somewhere between 23% and 25%. I've penciled it in here as 24%, and that will come in right at about $30 billion.

02:28 — Klein said, "The growth for our indirect channel in Q2 again significantly outpaced our direct channel growth," and this reflects, he said, a successful go-to-market transformation. He has revised the company's leadership, its product portfolio, the impression the market has about ERP and what SAP Cloud ERP means, and how the whole notion at the highest level of the autonomous enterprise sinks in.

04:20 — Now there's enterprise applications, agents, AI, and data vendors, and this growth streak it's had in the mid-20s has been very impressive. So the biggest challenge SAP has going forward will come, in some form that's unclear right now, from OpenAI and Anthropic, and exactly how those they are going to parlay their early focus on models into the whole agentic AI movement in the agents and workflow space.

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In today’s Cloud Wars Minute, I explore OpenAI’s bold move into AI-powered consumer hardware and what it reveals about the future of trust in artificial intelligence.

 

Highlights

00:03 — OpenAI is adding yet another string to its bow as it becomes increasingly recognized as more than just its flagship ChatGPT product. Now, the company is reportedly developing its first consumer hardware device: a human-like AI companion that lives in the home.

00:21 — The report suggests that OpenAI is creating a portable, screenless AI smart speaker, not the AI phone that many people are expecting. As you might expect, the device will integrate with ChatGPT and handle questions, send messages, play media, and enable smart home controls.

00:38 — All pretty comparable to the existing smart speakers on the market, like Amazon’s Echo. However, OpenAI’s device is also expected to include cameras and sensors to get a better understanding of where it is and the context. While mechanical moving elements will give it more presence. Over time, the AI will learn about its owner and become increasingly personalized.

01:01 — Now, beyond the obvious—and by that I mean OpenAI’s potential foray into consumer electronics and all the potential battles that might start between the leaders in that space—there’s something really interesting about the ambition here and what it says about where we are today. Not long ago, the discussion was all about trust.

01:21 — Could we get consumers to trust AI enough to get the most from it? Looking at this investment, I think the answer is yes. This is an AI that not only observes and listens to its owner, but actively changes to adapt to their likes, dislikes, and personalities, passively and without waiting for requests. This is a big jump.

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In today’s Cloud Wars Minute, I compare Microsoft’s latest cloud results with Google Cloud’s accelerating momentum.

 

Highlights

00:09 — Microsoft Cloud revenue was almost $60 billion for the quarter, up 27%. The RPO, as I said, was up 84%. It’s now the biggest RPO total, slightly ahead of Oracle. Microsoft Cloud: $678 billion for that. It said that Azure revenue was up 43% and that its revenue for the fiscal year ended June 30 exceeded $100 billion for Azure.

01:46 — So if we look at the last five quarters from Microsoft, the growth rate: 27%. Starting in Q2, the present, going back five quarters: 27%, 29%, 26%, 26%, 27%. So relatively flat over that period of time. The 29% jumped up a little, but the others, all 27s and 26s.

02:14 — Over those same five quarters, Google Cloud’s growth rate has absolutely soared, and the trajectory, the arc of its growth, representing customer demand in the marketplace, has been remarkable. So again, starting from the just-finished quarter and going backward in time: 82%, 63%, 48%, 34%, and 32% growth rates.

02:49 — What we’re talking about here is the arc of the growth. Google Cloud is getting a much bigger share of what’s happening here. It’s winning more business. It’s taking deals away from Microsoft, AWS, and perhaps Oracle as well, and they’re winning a lot of new business.

04:40 — So we’ll get AWS numbers later today. I’ll be following up next week with some insights into that and give the head-to-head comparison. It is an extraordinary time, but the ultimate truth is coming from the customers and where they are deciding to make their investments as they move into the AI Economy.

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In today's Cloud Wars Minute, I look at Microsoft's strategy for balancing AI innovation with local governance, culture, and national control.

Highlights

00:04 — I want to start today with a quote from Natasha Crampton, Microsoft's Chief Responsible AI Officer. "AI sovereignty doesn't mean doing it alone." This quote stands out from an interview she recently gave on the sidelines of the UN AI for Good Summit in Geneva.

00:48 — Ultimately, Crampton, echoing Microsoft's stance, stated that nations should leverage the best global AI technologies while ensuring they're adapted to local laws, languages, cultures, and values. Crampton explains that AI sovereignty is about control, not isolation. It's about cross-border coordination whilst making sure that countries retain control over how AI is deployed, governed, and used.

01:18 — One of the main problems that Crampton highlights regarding AI sovereignty is how AI is widening the gap between developed and developing economies. She says we cannot let the digital divide become an even greater AI divide. She emphasized the importance of making these technologies more accessible to the Global South.

01:43 — She says that AI sovereignty is about making sure that local impact, local cultures, values, and norms are prioritized within AI systems while taking advantage of global technology. AI becomes far more valuable when it understands local languages and cultures rather than simply translating from English.

02:15 — Overall, Crampton laid out a clear and, I'd say, pretty unique vision for what AI sovereignty can be. It's also a clever position for Microsoft to take, saying to governments that choosing Microsoft doesn't mean giving up sovereignty because they can control the data, the governance, and the policies on Microsoft's global platforms.

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