Microsoft Azure is a ~$56 billion business

Welcome to Runtime! Today: why a cloud spending revival has yet to arrive, Microsoft refutes a security report it helped shape, and the latest funding rounds in enterprise tech.

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The optimizations will continue

While it seems like the worst is over, Microsoft and Google weren't able to offer hope Tuesday that a rough year for enterprise tech spending might be finally starting to rebound. Both companies reported cloud earnings that surpassed the reduced expectations of Wall Street following almost a year of belt-tightening among enterprise tech buyers, but cautioned that growth will still be moderate over the second half of the year.

Revenue from Microsoft Azure grew 27% while Google Cloud revenue grew 28%, beating estimates for the quarter. However, both companies warned that customers are still being cautious with their spending plans, which sent Microsoft's stock lower in after-hours trading.

But Microsoft revealed a key detail about Azure revenue for the first time Tuesday, while stopping short of finally disclosing the revenue recorded by arguably the most important business in the company.

• "The Microsoft Cloud surpassed $110 billion in annual revenue, up 27% in constant currency, with Azure all-up accounting for more than 50% of the total for the first time," said CEO Satya Nadella at the top of his prepared remarks during a conference call following the release of the results.
• The disclosure comes after The Information spotted a court filing last month that pegged Azure revenue at $34 billion during its 2022 fiscal year, which always ends in June.
• For comparison, AWS recorded $80.1 billion in revenue during the 2022 calendar year, although that doesn't include the first six months of 2023, which Amazon's CFO called "uncharted territory" earlier this year.
• Microsoft expects slightly slower Azure growth during the current quarter thanks to what Nadella called "catch-up optimization" from customers who are still paring back the irrational exuberance they displayed during the early months of the pandemic.

For its part, Google Cloud turned in another profitable quarter after years of losses.

• Google Cloud is also growing slightly faster than Azure, with 28% growth during the last quarter to reach $8 billion in revenue.
• However, "that being said, we saw continued moderation and the rate of consumption growth as consumers optimize their spend," said Alphabet CFO Ruth Porat on a conference call following the results.
• Google doesn't break out the difference between Google Cloud Platform revenue and Google Workspace revenue in the overall Google Cloud results, but Gartner estimated that Google's infrastructure business recorded $9.1 billion in revenue during 2022, when Google Cloud overall recorded $26.3 billion in revenue.

Microsoft executives were peppered with questions regarding when the billions of dollars it has invested in AI over the last year will start to bear fruit.

• In her prepared remarks, CFO Amy Hood pointed out that a lot of the services Microsoft has introduced this year won't become generally available until the second half of its 2024 fiscal year, which translates to the first half of 2024.
• Nadella argued that to properly take advantage of AI services, businesses really need to be on the cloud, and there are more companies that have yet to make that migration than people might think.
• He also argued that the investment in AI services has already generated new business for Azure.
• "We are seeing new logos: Customers who may have used another cloud for most of what they do are for the first time sort of starting to use Azure for some of the new AI workloads," Nadella said.

We'll get a fuller picture of enterprise tech spending over the next several weeks as more earnings reports come in, with AWS scheduled to report numbers next Thursday.

Not like that

Last week security research company Wiz posted a very detailed description of how Chinese attackers took advantage of a stolen authentication key and a flaw in Azure AD to break into government email accounts, ending the post by thanking Microsoft "for working closely with us on this blog and helping us ensure it is technically accurate." Hours later, Microsoft threw Wiz under the bus.

“Many of the claims made in this blog are speculative and not evidence-based,” a Microsoft spokesperson told The Record after the blog was published. Microsoft's beef seemed to be that Wiz described "hypothetical attack scenarios," according to a follow-up statement it sent to The Record, but that's what security professionals do in order to help clients prepare for actual attack scenarios.

Given that so many Microsoft customers did not have the premium logging tools needed to detect this incursion available to them at the time of the incident, Wiz advised Azure customers to update their Azure SDK and cache to ensure the stolen keys can't be used again. And whether Microsoft likes it or not, Wiz is taking this incident very seriously: "We believe this event will have long lasting implications on our trust of the cloud and the core components that support it, above all, the identity layer which is the basic fabric of everything we do in cloud," it wrote.

Enterprise funding

OneTrust raised $150 million in a down round that nonetheless values the risk-management SaaS company at $4.5 billion.

Solink landed $60 million in Series C funding to bring its cloud-based video surveillance technology to international customers.

Hightouch raised $38 million at a $615 million valuation to build out its customer-data platform technology for business users interested in no-code tools.

The Runtime roundup

AMD released patches for a new vulnerability affecting its Epyc data-center processors that appears similar to the Meltdown vulnerabilities that shook the chip industry in 2018.

The European Union appears ready to take a closer look at the $20 billion Adobe-Figma acquisition deal, following an earlier decision by U.K. regulatory authorities to scrutinize the competitive aspects of the deal.

Nvidia's GTX Cloud, which promises to simplify the experience of using its powerful GPUs for a hefty sum, is now generally available on Oracle's cloud infrastructure.

Coreweave will invest $1.6 billion in a new data center in Texas, adding a fourth U.S. region to its AI cloud.

French defense contractor Thales acquired cybersecurity company Imperva from Thoma Bravo for $3.6 billion, four years after Thoma Bravo bought it for $2.1 billion.

Ars Technica took a deep look at the IBM mainframe, a surprisingly sticky holdover from the 1950s in the modern enterprise.

Thanks for reading — see you Thursday!