Hyperscaler is a computing term that allows data centres and cloud servers to quickly scale up or down depending on internet traffic. This was the innovation that created Amazon Web Services and led Microsoft and Google to quickly follow with Azure and Google Cloud respectively. (Side note: hyperscaling is sometimes used in an investing context to describe extremely fast growing companies – for this article, we’re using it to describe these cloud computing players).
This article has taken a look at the recently released second quarter results for the hyperscalers – Amazon, Google, Microsoft and IBM. The first takeaway is that these companies all continue growing their cloud infrastructure businesses. Amazon Web Services reported 33% year-on-year growth, Google Cloud reported 36% and Microsoft Azure leading the charge with 40%.
What has been particularly pleasing for these businesses is that they have continued this growth rate despite all slowing economy. This is opposed to a company like Shopify, that is reporting weaker results because their customers – many small eCommerce websites – are struggling. As the overall tech sector struggles and funding dries up, there may have been worry that a similar story would emerge with these hyperscalers. So far, this has not eventuated.
But it remains an important watch out for investors in this space. This article summarises some of the commentary from the big tech companies that suggest growth in cloud computing is slowing and the time to close a deal is lengthening – suggesting the current pace of growth may not hold as companies tighten their belts in a tougher economic environment.
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