Cloud Computing Giants' Data Center Spending Remains a Mystery to Wall Street Analysts

Strategic Insights -

As e-commerce, online gaming, and remote work surged in 2020, Amazon, Microsoft, and Google led the charge in data center spending, but the exact figures remain unclear due to a lack of transparency in their financial reports. Amazon's capital spending jumped 78% to $12.1 billion in the March quarter, but it's uncertain how much of that went towards cloud computing infrastructure. The corporate switch to working from home and the booming internet video market have driven demand for cloud services, making 2021 a crucial year for cloud capital spending.

Key Takeaways:

  • Amazon's capital spending jumped 78% to $12.1 billion in the March quarter, with an estimated 22-28% attributed to cloud computing infrastructure.
  • The three major US hyperscalers (Amazon, Google, and Microsoft) spend between 60-80% of their total capital expenditure on cloud computing data centers and related infrastructure equipment.
  • Amazon's 2020 capital spending boomed 138% to more than $40.1 billion, while Google's overall capital spending dipped 5% to $22.3 billion and Microsoft's total capital spending rose 30% to $17.6 billion.
  • AWS cloud revenue rose 30% to $45.4 billion in 2020, while Microsoft's Azure cloud business climbed 50% to $24.7 billion and Google's cloud revenue rose 46% to $13.1 billion.
  • Bank of America forecasts 2021 cloud capital spending by the seven big cloud computing titans (including Amazon, Google, and Microsoft) will rise 20% to $128.3 billion.
  • Dell'Oro forecasts a 20% increase in hyperscale cloud data center capital spending in 2021, but did not provide a dollar figure or list the companies involved.

Statistics:

  • $12.1 billion: Amazon's capital spending in the March quarter, an 78% increase from the previous year.
  • 60-80%: The estimated percentage of total capital expenditure spent by the three major US hyperscalers on cloud computing data centers and related infrastructure equipment.
  • $40.1 billion: Amazon's total capital spending in 2020, a 138% increase from the previous year.
  • 30%: AWS cloud revenue growth in 2020.
  • 50%: Microsoft's Azure cloud business growth in 2020.
  • $128.3 billion: Bank of America's forecast for 2021 cloud capital spending by the seven big cloud computing titans.

Sources:

  • [Morgan Stanley analyst Katy Huberty's note to clients]
  • [Bank of America report]
  • [Dell'Oro's March 17 press release]
  • [Reinhardt Krause's Twitter]