Cloud Capital: MSFT Savors Azure's Vigor, IaaS Prospers in Public Cloud + SKYY Glides to New Apex
By: Tech Video Project
But first, this week was packed with earnings from Microsoft, Facebook and Twitter. While technically not pure cloud players (we will talk a bit about that later) these companies each serve as cloud barometers in their own respect.
Microsoft's fiscal third-quarter results were solid. Commercial cloud revenue, which includes revenue from Azure, Dynamics 365, and Office 365 commercial, increased 41%, to $9.6 billion, and accounted for 31.4% of total revenue. The company's commercial cloud gross margin was notably up an impressive 5 percentage points compared to the year-ago quarter, coming in at 63%. The main driver for this was improvement in the gross margin of its cloud-computing business Azure, which saw its revenue soar, rising 73% year over year.
Social-network juggernaut Facebook reported revenue rose 26% year over year, to $15.1 billion -- though this growth was down from 30% revenue growth in Q4. Adjusted earnings per share beat analysts estimates. CEO Zuckerberg boasted about the company's momentum with its Stories format.
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Meanwhile, Twitter saw revenue in its first quarter rise 20% year over year, to $787 million. The biggest highlight was a reacceleration in its year-over-year growth rate for its monetizable daily active users. These daily users were up 11% year over year during the quarter, rising to 134 million.
Look at cloud at a high level, and there is no disputing its far-reaching role in IT. It is enabling the adoption of advanced technologies such as the Internet of Things, blockchain and artificial intelligence. We also fully descry cloud's advantages including flexibility, access, scalability, disaster recovery, agility, energy efficiency, and opportunity for enterprises to pay for resources they need without undertaking costly investments.
But if you are putting your money on the line you need to closely examine any menace to cloud's growth, or factors that could moderate its adoption.
Research into Cloud markets gets daedalean quickly. Even industry experts concede cloud is enigmatic. For starters, the "public" cloud market (computing services offered by third-party providers over the public Internet) is actually several service models all bundled into one.
Just to get on the same page, we are actually talking about aggregating the following services: Cloud Business Process Services, Cloud Application Infrastructure Services, Cloud System Infrastructure Services, Cloud Application Services and Cloud Management / Security Services. Still with us?
Estimates for size of these markets vary widely but let's stick with $206 billion, the most recent number provided by Gartner. The fastest-growing segment of the market is cloud system infrastructure services also known as infrastructure as a service or IaaS, which is forecast to grow 27.6 percent this year to $39.5 billion. IaaS will be a $63 billion market opportunity by 2021, says Gartner.
Here's the roadmap... The public cloud market hit $178 billion last year, but it will need to grow to $278 billion by 2021 to meet expectations. So things look good right now, but we have some serious work ahead of us to meet our goals.
So what's Wall Street's current impression of cloud computing? If you had to pick a word it might be "favorable". First Trust's Electronically Funds Transfer (SKYY) edged up 2.5% this week, again setting a 52-week high. It ended the week with a $60.69 Market Price, and just slightly over 2.28 billion dollars in Net Assets. Volume on Friday was right around 240,000 shares.
"While cloud computing has been receiving increased attention in recent years" says NASDQ, "it is still a relatively new industry group within the broader technology sector... said another way, cloud computing as an industry is not as old as, say, semiconductors or traditional software."
As such, there are some qualifiers that are part of SKYY's underlying index. For instance, the index allows for the inclusion of three types of companies: dedicated cloud providers, non-pure play cloud companies and technology conglomerates.
An example of a dedicated cloud company would be VMware, SKYY's second-largest holding. An example of a non-dedicated company with some cloud exposure would be Facebook (FB), SKYY's sixth-largest holding.
What about a company like IBM? (which is also a SKYY constituent)
Meanwhile, Global X's Cloud Computing EFT (CLOU) brand-new fund, and it got off to a good start ending Friday at $15.59, up 7% from its opening price. Early in the game, CLOU only have around $67M in total assets.
CLOU tracks a modified market cap-weighted index containing companies that get at least 50 percent of their revenue from cloud computing activities. That includes internet-related businesses such as licensing and delivering software on a subscription basis, providing a platform for creating software applications, and providing virtualized computing infrastructure. It also includes companies that manage server storage space and data center real estate investment trusts, and those that make or distribute cloud and edge computing infrastructure and hardware.
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Disclaimer: The blurbs highlighted on Cloud Capital are available for information purposes only, and don't necessarily reflect opinions of our editors.
Page Updated Last on: Jun 18, 2019