Q3 2025 State of the Cloud & Software
We closely watch cloud revenues of Amazon, Microsoft, and Google to gauge the direction of the cloud, which we believe can be a tailwind for software spend, especially as AI is getting its own budget at corporations that does not necessarily pull from software’s budget. The cloud divisions of these companies are Amazon’s AWS, Microsoft’s Intelligent Cloud, and Google Cloud Products. All three have now reported their Q3 growth, summarized below.
Microsoft
MSFT had a monster Q3, with Intelligent Cloud posting YOYG of 28% and the Azure unit doing 40% YOYG. Regarding the cloud, “Demand is increasing,” chief financial officer Amy Hood said. “It is not increasing in just one place; it’s increasing across many places. We’re seeing usage increases in products, new products launched that are getting usage very quickly. When people see real value, they actually commit real usage.”
Q2 2025: MSFT’s Intelligent Cloud had $29.8Bln in revenue, up 26% year over year. According to CEO Satya Nadela, “Our data centers, networks, racks, and silicon are all coming together as a complete system to drive new efficiencies to power both the cloud workloads of today and the next-generation AI workloads.”
Q1 2025, Chief Financial Officer Amy Hood said “demand signals” across the company’s businesses have remained consistent so far this month. That at least indicates that the major corporations that drive the bulk of Microsoft’s revenue aren’t slashing their technology budgets just yet. Chief Executive Satya Nadella called software “the most valuable resource we have to fight any type of inflationary pressure or any type of growth pressure, where you need to do more with less.”
Q4 2024: Microsoft cited supply constraints in its earnings to explain why its cloud business didn’t grow faster. Nadella praised DeepSeek’s innovations and said the techniques it used will “all get commoditized” and be broadly used in the industry, which will benefit Microsoft’s cloud computing and PC businesses. “AI will be much more ubiquitous,” he said. “This is all good news as far as I’m concerned.”
Google also had a banger. With $15.1mm of revenue in it’s cloud unit for Q3, up 28% YOY. “We have signed more deals over $1 billion through Q3 this year than we did in the previous two years combined,” Alphabet CEO Sundar Pichai said of the cloud segment.
Q2 2025: Google’s Cloud grew 31% YOY to $13.6bln. According to CEO Sundar Pachai “Next, Google Cloud. We see strong customer demand driven by our product differentiation and our comprehensive AI product portfolio. Four stats show this. One, the number of deals over $250 million doubling year over year. Two, in the first half of 2025, we signed the same number of deals over $1 million that we did in all of 2024. Three, the number of new GCP customers increased by nearly 28% quarter over quarter.”
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Q1 2025: Google’s Chief Business Officer Philipp Schindler said it is “too early to comment” on trends for the current quarter, as everyone was trying to understand tariff impacts.
Q4 2025: Sundar Pichai said Google was accelerating its investments in the data centers that power AI, both for his company and clients of its cloud-computing business. Pichai said Google would spend about $75 billion on capital expenditures this year, compared with $52.5 billion in 2024. Alphabet Chief Financial Officer Anat Ashkenazi said the cloud business exited the year with more customer demand than available capacity, and it was working to build more.
Amazon
Amazon broke out as well, with $33mm in Q3 revenue from it’s AWS cloud division. “You’re going to see us continue to be very aggressive in investing in capacity because we see the demand,” CEO Andy Jassy said
Q2 2025: Amazon’s revenue from AWS was $30.9bln in the quarter, up 17% year over year. According to CEO Andy Jassy, “AWS is a reasonably large business by most standards, and though we expect growth will be lumpy over the next few years as enterprise adoption cycles, capacity considerations, and technology advancements impact timing, it’s hard to overstate how optimistic we are about what lies ahead for AWS’ customers and business. I spent a fair bit of time thinking several years out”
It’s worth noting that while Google Cloud remains about one-third the size of Amazon’s and Microsoft’s cloud businesses. The combined cloud revenue of these three providers offers the clearest view of the industry’s overall health and, by extension, AI and potentially software spending. Together, they generated $79 billion in cloud revenue this quarter which is a 26% year-over-year increase.
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