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By | Neil McAllister 23rd April 2015 19:15

Your essential guide: What to look for in today's Amazon, Google, and Microsoft earnings

IaaS indeed, it's one helluva PaaS-ing contest

Analysis It's probably not entirely a coincidence that Amazon, Google, and Microsoft will all file their quarterly earnings reports on Thursday. But while these tech titans wage a tug-of-war for your public compute workloads, each is relying on other sources of revenue to bankroll its cloud land grab – and the three companies have very different core businesses.

Amazon's quarterly report will be the most daring of the three. This is expected to be the first quarter for which the online retailer details figures for its Amazon Web Services (AWS) cloud unit. Previously it has always lumped the division's revenue under the "North America/Other" reporting unit.

It's not known yet what level of detail Amazon will give regarding its AWS finances. Don't expect huge profits, though – or any profits at all, for that matter.

It's likely that the decision to break out the AWS numbers has less to do with bragging about the cloud unit's profitability as it does with reassuring investors of the health of Amazon's core retail business. The Seattle firm has a frustrating habit of reporting huge losses even as it rakes in billions, and it's expected to report another loss this quarter.

Jockeying for second place

Microsoft, meanwhile, is thought to have outspent Amazon on data center construction in three of the four previous quarters, leaving it solidly in the Number Two spot in the public cloud race. But while it's sure to crow about its Azure cloud successes in Thursday's earnings report, it can't change the fact that the bean counters will be looking more closely at its real core business: making software and selling it to people.

Redmond is planning to reveal its two biggest sources of revenue – Windows and Office – by the end of this year. Sales of both have been down in recent quarters, and neither new release is a sure bet. What's more, given that customers will be able to upgrade to Windows 10 for free for one year, actual sales of Windows 10 will more than ever be tied to the overall health of the PC industry, which we all know isn't good.

That's probably why Microsoft likes to break out its quarterly cloud revenue growth as a metric, even though its recent reporting structure change made it more difficult to divine the actual numbers. It's probably also why it likes to combine revenue from its SaaS offerings, including Office 365 and Dynamics CRM Online, with what it earns from Azure. Such tricks can't disguise the weakness in its traditional businesses, though, and in fact what it spends on cloud build-out may yet exceed what it earns in sales.

it is no surprise that the public cloud has become the dominant driver of spending on servers, storage, and switching in the IT sector, and private clouds that mimic them are also a big component of spending now, too ...
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That leaves Google, which is a distant third in the public cloud market but has by no means given up. In the past few quarters, it spent roughly twice as much as either Amazon or Microsoft on purchases of property and equipment, suggesting its data center growth has been even more aggressive.

Be that as it may, however, Google still earns the bulk of its billions in revenue – nearly 90 per cent – not from renting compute and storage but from selling and facilitating advertising. It lumps the revenue from its cloud computing business in with sales of apps and media from its online stores, hardware sales, fees, and so on.

It hasn't spent much time dwelling on its Cloud Platform revenue numbers in past earnings reports, either. Still, it has been more vocal about wanting to be a player in the public cloud game in recent months, including publishing a series of blog posts in which it pits its pricing head-to-head with Amazon's.

Google is still the runner-up in the public cloud race. But the fact that analysts will spend most of their time on Thursday analyzing such advertising metrics as traffic acquisition costs and cost-per-click may be a convenient distraction from the fact that the Chocolate Factory is pulling closer to its cloudy competitors, which definitely makes it one to watch. ®

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