According to data published by Canalys, businesses worldwide spent a record-high $53.3 billion on cloud infrastructure in the fourth quarter of 2021. For the entire year, cloud infrastructure spending amounted to $191.7 billion, an increase of $50.0 billion from 2020.
The three biggest cloud companies accounted for 61% of the total spending, with Amazon Web Services (ASW) accounting for 33%, Microsoft Azure accounting for 22%, and Google Cloud accounting for 9% of the total spending during the fourth quarter.1
Cloud Computing in North American Banking
The North American banking sector could soon be opting for increased cloud computing. According to the consulting firm Accenture, currently, banks handle only 12% of their tasks on the cloud, but that number is expected to double in the next two years.2
Some major banks are already making solid strides. Goldman Sachs recently announced the launch of Goldman Sachs Financial Cloud for Data in partnership with Amazon Web Services. Goldman Sachs’ goal is to provide its clients with financial data and analytical tools.3 Bank of America is already saving $2.0 billion a year due to building its on cloud infrastructure. Wells Fargo plans to move to data centers operated by Microsoft and Google in the coming years, while Morgan Stanley is working with Microsoft.2
Revenue and Growth Expectations in the Cloud
SAP SE is a global leader in enterprise application software. The company recently reported a total revenue of €27.8 billion for the year, with cloud revenue amounting to €9.4 billion, up 17% year-over-year. Cloud backlog for the year grew to €9.4 billion, an improvement of 32% from a year ago.4 For 2022, SAP expects its cloud growth to be robust. Total cloud revenue is expected to be in the range of €11.5 billion to €11.8 billion with free cash flow expected to be over €4.5 billion in 2022.
Microsoft Corporation is a household name with a focus on digital transformation through cloud and software solutions. The company reported revenue of $51.7 billion for the first quarter of 2022, an improvement of 20% year-over-year. Microsoft’s cloud business continues to perform well. Cloud revenue for the quarter grew 32% from a year ago to $22.1 billion. Profitability also remains solid; net income was $18.8 billion, an increase of 21% year-over-year, and diluted earnings per share was $2.48, up 22% year-over-year. During the second quarter of fiscal 2022, Microsoft returned $10.9 billion to shareholders in the form of share repurchases and dividends. This represents a 9% increase year-over-year. 5
Amazon.com reported net sales for 2021 at $469.8 billion, representing an increase of 22% year-over-year. 2020 sales amounted to $386.1 billion. Net income for the year also grew to $33.4 billion or $64.8 per diluted share. In 2020, net income was $21.3 billion or $41.83 per share. During the year, AWS gained a lot of traction with companies like Rivian, Best Buy, Goldman Sachs, Pfizer, Discovery, United Airlines, and Bayer Crop Science increasing their use of AWS cloud and related services.6
Investing in the Cloud
Cloud Computing is transforming the global economy. Over the past decade, the Cloud has fundamentally changed the way businesses and individuals access data. From physical servers to portable drives, the Cloud has helped eliminate the need to store information on-premise. If you’re looking for cloud investing options, consider the Evolve Cloud Computing Index Fund (DATA ETF), Canada’s first cloud computing ETF. DATA ETF invests primarily in equity securities of companies located domestically or internationally that have business operations in the field of cloud computing. To learn more about DATA ETF, please click here: https://evolveetfs.com/data/.
Looking for a more diversified investment solution? The Evolve Innovation Index Fund (EDGE ETF) is an 8-in-1 innovation fund that invests in disruptive innovation themes across a broad range of industries, including: cloud computing, cybersecurity, egaming & esports, automobile innovation, 5g, fintech, genomics, and robotics & automation. For more information on EDGE ETF, visit our website at https://evolveetfs.com/edge/ or click here.
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- “Global cloud services spend exceeds US$50 billion in Q4 2021,” Canalys, February 4, 2022; https://www.canalys.com/newsroom/global-cloud-services-Q4-202.
- Nguyen, L. “Banks Tiptoe Toward Their Cloud-Based Future,” The New York Times, January 3, 2022; https://www.nytimes.com/2022/01/03/business/wall-street-cloud-computing.html.
- “Goldman Sachs and AWS Collaborate to Create New Data Management and Analytics Solutions for Financial Services Organizations,” Goldman Sachs, November 30, 2021; https://www.goldmansachs.com/media-relations/press-releases/2021/goldman-sachs-aws-announcement-30-nov-2021.html.
- “Q4 and Full-Year 2021 Financial Results,” SAP SE, January 27, 2022; https://www.sap.com/investors/en/calendar/past.html?pdf-asset=a29a2c2c-147e-0010-bca6-c68f7e60039b&page=5.
- “Microsoft Cloud Strength Fuels Second Quarter Results,” Microsoft Corporation, January 25, 2022; https://www.microsoft.com/en-us/investor/earnings/fy-2022-q2/press-release-webcast.
- “Amazon.com Announces Fourth Quarter Results,” Amazon.com., Inc., February 3, 2022; https://ir.aboutamazon.com/news-release/news-release-details/2022/Amazon.com-Announces-Fourth-Quarter-Results/.