How are the big cloud AI providers doing at the end of the second quarter? Bernstein weighs By Investing.com

As the Q2 2024 earnings season draws to a close, Bernstein analysts looked at how some of the big cloud AI providers — Amazon (NASDAQ: ), Microsoft (NASDAQ: ), Alphabet (NASDAQ: ) and Oracle (NYSE: – are stacking up in the competitive hyperscale cloud market.

Despite varying performances, the overall theme is that generative AI is starting to play a crucial role in driving revenue growth across the board.

Amazon: The company says AWS had a strong quarter, with revenue up 19% year over year to $26 billion.

Bernstein points out that the AWS acceleration was a bright spot in Amazon’s overall performance, driven by a combination of the end of cloud optimization efforts and an increase in AI-related activities.

Looking ahead, AWS is expected to maintain its growth momentum, especially as AI-related cloud activities increase in the second half of the year. However, analysts note that margins could squeeze as much as 30% due to increased depreciation related to investments in artificial intelligence and increased technical staff.

Microsoft: Analysts say Azure Microsoft continues to strengthen its position in the AI ​​space, with Azure AI contributing 8% to its growth.

While Azure’s global growth was slightly below expectations due to capacity constraints and non-AI demand in Europe, analysts believe Microsoft has taken over the AI ​​mantle from Google. Azure growth is expected to accelerate in the second half of FY25 as capacity issues dissipate and demand for AI increases.

Google: Google Cloud showed a strong performance with 29% year-over-year growth, beating expectations and reaching $10.3 billion in revenue. AI revenue, representing 6-10% of total GCP, played a significant role in this growth.

However, analysts warn that rising costs related to hiring technical talent and increased depreciation could hurt margins in the coming quarters.

Oracle: Oracle’s cloud business, though smaller than its competitors, is gaining ground, analysts say. They note that OCI Gen 2 is starting to generate significant growth for Oracle, particularly through its partnerships with Microsoft, Google and OpenAI.

Analysts see Oracle’s cloud business poised for “hyper-growth” with strong demand and growing capacity.