Microsoft Resells the Frontier | Tomasz Tunguz
Google owns its models & chips & spends aggressively on the margin that ownership captures, while Microsoft resells both layers & hedges with capacity it can stop buying.
Azure grew 43% last quarter, closing a fiscal year in which it passed $100b of revenue at 41% growth.1 Google Cloud grew 82%. Eighteen months ago the three grew within a few points of each other.2 The smallest now compounds at nearly twice Azure’s rate & almost three times AWS’s. Google is spending to win the race. Alphabet’s $44.9b of quarterly capex runs at nearly twice Google Cloud’s $24.8b of revenue, & cloud operating margin still expanded from 20.7% to 35.6% as operating income tripled.2 That margin is the point. Google owns the model & designs the chip, so it keeps the economics a…
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