State of the Cloud in Q2 2025
We closely watch cloud revenues of Amazon, Microsoft, and Google to gauge the direction of the software market. The cloud divisions of these companies are Amazon’s AWS, Microsoft’s Intelligent Cloud, and Google Cloud Products. All three have now reported their Q2 growth, summarized below.
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.”
In Q1, 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.”
In Q4, 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’s Cloud grew 31% YOY to $13.6bln. Sundar Pachai said in the earnings call, “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.”
In Q1, 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.
In Q4, Google Chief Executive 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’s revenue from AWS was $30.9bln in the quarter, up 17% year over year. According to 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, software and AI spending. Together, they generated $74 billion in cloud revenue this quarter which is a 23% year-over-year increase.
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